Analysts from CGS International, UOB Kay Hian (UOBKH) and OCBC Investment Research (OIR) have kept their “add” and “buy” calls for Genting Singapore G13 , after the group’s FY2023 results ended Dec 31, 2023.
All analysts have an unchanged target price — CGS at $1.30, UOBKH at $1.25 and OIR at $1.17.
Previously, Citi Research, Maybank Securities and DBS Group Holdings were mixed on the stock, with Citi and Maybank lowering their target prices and DBS raising theirs. All three analysts also kept their “buy” calls.
Genting’s revenue for the 4QFY2023 declined 6.2% q-o-q, and ebitda declined 34.2% q-o-q to $227.2 million. Its management cited the strong Singapore dollar, high airfares and accommodation costs, and slower recovery of Chinese outbound travels that have impacted its non-gaming revenue.
The group’s results missed most of the analyst’s and consensus estimates, which all brokerage houses have ascribed to higher impairment losses during the quarter. This was a result from increasing contributions from its VIP gaming segment which partially runs on a credit basis.
CGS analyst Tay Wee Kuang believes that Genting will continue to benefit from a recovery in Singapore’s tourism industry for the FY2024. He cites the Singapore-China 30-day visa exemption, and an uptick in Chinese tourists to the city-state during Lunar New Year as reasons.
However, he is cautious that the pace of earnings growth will moderate, due to the renovations at Hard Rock Hotel happening from Mar 2, 2024, and ongoing works at Singapore Oceanarium, Minion Land and Forum, which are set to be open in early 2025.
Tay introduces his FY2026 estimates and rolls forward his valuation, pegged at 9.4x FY2024 ev/ebitda, slightly lower than its five-year mean of 9.7x given his expectation of tapering earnings growth in FY2024.
He cuts his FY2024-FY2024 earnings per share due to higher credit impairment and lower hotel room availability in FY2024. Tay keeps his “add” with an unchanged target price of $1.30.
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Likewise, Jack Goh from UOBKH believes that Genting will benefit from a “fruitful” 2024. His optimism can be attributed to an accelerated recovery of foreign visitations and flight frequencies, and plenty of major entertainment events in 1H2024 including Coldplay, Mayday and Taylor Swift’s concerts.
He also cites a sustained trend of higher average spending in Resort World Sentosa (RWS); earnings accretion from Hotel Ora which will lift key inventories by about 30%; and RWS’ intensified marketing efforts through digital platform which will attract more footfall and spending.
Goh believes that Genting’s $6.8 billion expansion plan will eventually anchor RWS as one of Asia’s most sought after tourist destination. He also retains his view that RWS’ ongoing revamp will allow it to capitalise on the thus-far sustained higher spending per capita at the integrated resort, with the premiumisation being led by its non-gaming segment.
The analyst maintains his buy with an unchanged target price of $1.25, which implies a 9x FY2024 ev/ebitda, -0.3 standard deviation below its 10-year mean.
Finally, OIR’s analysts cite the same catalysts and downside risks, and are hopeful to see a stronger growth trajectory for Genting from 2025 with its new offerings.
They keep their “buy” call with an unchanged target price of $1.17.
As at 10.54am, shares in Genting Singapore are trading 1 cent lower, or 1.093% down at 90.5 cents.
