Despite a q-o-q ebitda decline in 1QFY2023 ended March 31 and missing analysts’ expectations, both UOB Kay Hian (UOBKH) and CGS-CIMB Research have maintained their “buy” call on Genting Singapore (GENS) G13 at target prices of $1.25 and $1.26 respectively, in anticipation of better quarters ahead.
GENS’s 1QFY2023 core adjusted ebitda of $191.7 million fell by 25% q-o-q from the previous quarter, due to lower non-gaming revenues and less favourable normalisation of “luck factor”. On a y-o-y basis, however, the group’s core adjusted ebitda stood 54% higher y-o-y.
According to UOBKH’s analyst Vincent Khoo, Resorts World Singapore’s (RWS) 1QFY2023 adjusted ebitda accounted for 16% of his FY forecasts. Gaming and non-gaming revenue fell 9% q-o-q and 15% q-o-q respectively from the seasonally strong 4QFY2022, with the gaming division accounting for 70% of group revenue in 1QFY2023, Khoo points out.
Similarly, analyst Tay Wee Kuang from CGS-CIMB notes that GENS’s 1QFY2023 revenue of $484.5 million was weaker than expected at 21.6% and 20.2% of CGS-CIMB and Bloomberg’s consensus’ FY2023 estimates respectively.
“GENS said the recovery of the non-gaming business remains constrained by lagging visitor arrivals from traditional visitor source markets, i.e. North Asia, as a result of airline capacity constraints and elevated airfares during the festive season, which could have impacted visitor volumes,” says Tay.
That said, the group’s gaming volumes remain “resilient”, says UOBKH’s Khoo. In its press announcement, the group disclosed that RWS’s hold-normalisation gross gaming revenue (GGR) would’ve improved by 12% q-o-q to $530 million for 1QFY2023, which works out to a hypothetical 34% share of Singapore’s GGR, he says.
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CGS-CIMB’s Tay notes that GENS’s GGR market share remains similar to its historical level of 40% since RWS and Marina Bay Sands by Las Vegas Sands started operations in 2010, suggesting that the competitive dynamics have remained stable.
In the year ahead, Khoo and Tay remain positive that GENS’s non-gaming and gaming revenues will continue to improve in the coming quarters, due to a steady improvement in foreign visitation as intra-Asia flight capacities slowly restore to pre-pandemic levels by 4QFY2023 or 1QFY2024.
In addition, RWS’s ongoing works are being carried out without disruption — the fully renovated and rebranded Hotel Ora soft-launched and became operational in April 2023, ahead of CGS-CIMB Tay’s anticipated May 2023 opening timeline.
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Subsequently, Hotel Michael and Crockfords Towers is to be renovated in phases, reducing disruption to room availability, and ongoing works at Minion Land and Singapore Oceanarium have not disrupted operations at Universal Studios Singapore and SEA Aquarium, which are both scheduled for soft opening in early 2025.
Finally, The Forum will also begin an extensive transformation between May 2023 and end-2024, to double its gross floor area to feature more restaurants, specialty shops and concept stores to attract visitors.
CGS-CIMB’s Tay trimmed his FY2023 adjusted ebitda by 7.3% due to a slower tourism recovery in 1QFY2023, but retained his FY2024-FY2025 forecasts, with the target price pegged to 10 times FY2024 adjusted ebitda.
Meanwhile, UOBKH’s Khoo pegged his target price to 9.9 times FY2023 ev/ebitda.
As at 12.27pm, shares in GENS are trading 6 cents lower, or 5.405% down at $1.05.
