Maybank Securities analyst Yin Shao Yang has kept his “hold” rating on Genting Singapore with an increased target price of 86 cents from 84 cents.
Yin’s report, dated May 10, comes amid the earlier-than-expected reopening of borders.
In light of that, the analyst has also raised his earnings estimates for FY2022 and FY2023 by 163% and 123% respectively.
As Singapore, Malaysia and Indonesia reopened their borders coupled with Singapore doing away with pre- and post-arrival testing on April 26, two-thirds to three-quarters of Singapore’s FY2019 gaming market has returned.
“Our channel checks note a discernible rise in tourists in Singapore since,” says Yin. “Thus, we bring forward our forecast that Resorts World Sentosa’s (RWS) VIP volume will recover to 83% of FY2019 levels to mid-FY2022 from FY2024 and RWS’ mass market gross gaming revenue (GGR) will recover to 92% of FY2019 levels to FY2023 from FY2024.”
The analyst however is doubtful that FY2024 earnings will change as he is sceptical that gaming operations will recover to 100% of pre-Covid-19 levels.
See also: RHB initiates coverage on CSE Global with ‘buy’ call with TP of 58 cents
“We doubt Singapore and RWS’s VIP volume will recover to 100% of FY2019 levels due to China outlawing cross-border gambling punishable by around 10 years’ imprisonment from March 2021,” says Yin.
Yin is also doubtful that SG and RWS’s mass market GGR will recover to 100% of FY2019 levels as negatively impacted Macanese, Philippine and Cambodian integrated resorts will try to draw premium mass gamblers that frequent Singapore integrated resorts to compensate.
Moreover, Thailand is considering legalising integrated resorts at this juncture as well, leading to possible regional competition with the likes of Singapore.
See also: Suntec REIT biggest beneficiary from MAS’s ‘looser’ leverage, ICR rules: OCBC
However, Yin believes that it is unlikely that Thailand’s integrated resorts will draw away many Malaysian and Indonesian gamblers due to deep personal and commercial ties to Singapore.
On the other hand, China’s mass gamblers may explore Thailand’s new avenue in this area, considering how 11 million Chinese visited Thailand without integrated resorts in 2019, as compared to 3.6 million Chinese to Singapore.
“In the event that Thailand’s integrated resorts materialise, we would wonder how financially viable the $4.5 billion RWS 2.0 expansion will be,” writes the analyst.
As at 10.21am, shares in Genting Singapore are trading flat at 78 cents at an FY2022 P/B ratio of 1.2x and dividend yield of 2.5%.
