DBS Group Research analysts Jason Sum and Paul Yong have maintained “buy” on Genting Singapore G13 after its 3QFY2024 ended September results, which fell short of expectations.
Genting Singapore’s 9MFY2024 adjusted ebitda of $735 million accounts for 64% of DBS’s FY2024 estimates. The analysts believe the significant decline was primarily due to operating deleverage, resulting from lower VIP gaming revenue.
Even after adjusting for a normalised luck factor, the period’s adjusted ebitda would be around $792 million, or 69% of the analysts estimates — still missing their projections.
“Despite being a seasonally strong quarter with higher tourist arrivals, mass gaming volumes were largely flat q-o-q, while VIP volumes dipped slightly by approximately 2.3%.
“We believe this may be due to a shift in tourist demographics, with more visitors fitting the mass-market gaming profile rather than VIP clients, alongside a decline in visitation from the Chinese market, which constitutes Genting Singapore’s primary customer base,” they add.
Supporting this view, the analysts point out that peer Marina Bay Sands also reported a significant 20% y-o-y decline in VIP rolling volumes, but saw a more moderate 4% y-o-y reduction in mass gaming volumes in its 3QFY2024. This suggests a broader trend towards a mass-market tourist mix.
See also: UOBKH calls Centurion Corp a stock for ‘growth-minded investors’
Genting Singapore reaffirmed that VIP volume could remain soft in the near term given the macroeconomic backdrop in China, but mass gaming remains resilient, the analysts note.
“Overall, we believe the company could see a y-o-y profitability uplift next year from a normalising win rate and the completion of certain Resorts World Sentosa renovations,” the analysts say, adding that the target price is currently under review.
As at 11.05am, shares in Genting Singapore are trading 3.5 cents lower or 4.17% down at 80.5 cents.
