Following the tripling of Genting Singapore’s (GENS) earnings for the 1HFY2023 ended in June at $1.08 billion, analysts at Citi Research and Maybank Securities remain positive on the integrated resorts operator as a post-Covid-19 recovery play.
Both George Choi from Citi and Yin Shao Yang from Maybank have maintained their “buy” calls, with a higher target price of $1.26 from Choi, and an unchanged target price of $1.12 for Yin.
GENS’ luck-adjusted 2QFY2023 ebitda amounted to $201 million, which was largely in line with Citi’s forecasts.
With a 25% growth in its revenue q-o-q to $596 million in this second quarter, adjusted property ebitda increased 36% to $261 million, representing about 89% of 2QFY2019 levels, according to Choi from Citi.
“Had Resorts World Sentosa (RWS) held normally, its gross gaming revenue (GGR) would have improved about 3% q-o-q to $548 million. We believe that the beat also has to do with 31% q-o-q improvement in non-gaming revenues.” he adds.
This is driven by increased attractions’ attendance and spend per customers, thanks to GENS marketing and promotional efforts. RWS presented a series of events and performances in 1H2023 including the LIV golf event in Singapore and Aaron Kwok’s Amazing Kode World Tour 2023 concert, Choi adds.
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“Guests will also see the return of Halloween Horror Nights 11 at Universal Studios in September, and management is keeping an eye on investment opportunities in Thailand,” says Choi.
GENS 2QFY2023 reported numbers also suggest that RWS’ gaming trends were largely solid, according to Choi, where VIP volumes rose 13% q-o-q.
Choi notes that no single country has dominated the VIP volume improvement, where RWS is no longer dominated by mainland Chinese visitors anymore as foreign visitor arrivals into Singapore continued to improve.
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“We forecast that Singapore’s gaming industry ebitda will stay at about $3.3 billion per annum at a normal GGR year in the medium term. The Singapore gaming market and GENS (the only pure Singapore gaming play) could appeal to investors who are looking for a defensive shelter in volatile markets. Furthermore, we believe that the new phase for RWS could helps GENS retrieve its earnings growth.” Choi says.
Choi’s $1.26 target price is derived from assigning equal weights to equity values derived from their sum-of-the-parts and discounted cash flow model (DCF) valuation methodologies. He values the Singapore casino at 10x FY2024 ev/ebitda.
Similarly, Maybank’s Yin expects 2HFY2023 to be “even better” on seasonally more visitors from China, as July’s seat capacity from China to Singapore has recovered to 74% of pre-Covid-19 levels.
Yin notes that GENS’ 2QFY2023 core net profit of $160.6 million brought 1HFY2023’s core net profit to $291.8 million which was within his expectations at 46% of the FY estimate.
While the first interim dividend per share (DPS) of 1.5 cents accounted for only 38% of his FY estimate, Yin says this is in-line with his expectations as GENS traditionally declares more DPS in the 2H.
Likewise, Yin says that RWS’ recovery operations has been broad based, not driven just by the return of Chinese visitors, but also the return of Southeast Asian visitors from Indonesia and malaysia.
“Thus, we believe that RWS is better positioned to withstand any potential deceleration in the Chinese economy than say the Macanese integrated resorts,” he adds.
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Finally, Yin says that RWS traditionally welcomes more visitors in Jul and Aug due to summer holidays in the northern hemisphere. As GENS notes that Chinese visitors are starting to return en masse, the analyst expects GENS’ 2HFY2023 to perform better h-o-h.
“On that note, we maintain our earnings estimates and $1.12 DCF-based target price,” says Yin.
As at 4.25pm, shares in Genting Singapore are trading 1.5 cents lower, or 1.57% down at 94 cents.
