Genting Singapore has had a stellar 2022 — the stock rallied over 22% last year on the back of economic reopening and the return of international tourists as well as continual local patronage. Further border reopening — especially between China and the rest of the world — is also expected to be a boon for the stock.
Last year, in the “lull period” of the slow border reopening, Genting Singapore was busy executing its reinvestment and expansion plans for Resorts World Sentosa (RWS).
To recap, in 2019, the company announced a $4.5 billion reinvestment programme for RWS. Dubbed RWS 2.0, the project involves expanding the property’s gross floor area by 50% — adding 164,000 sqm of leisure and entertainment space. Work started in 2Q2022.
Initially slated to complete the project by 2024, the company in 2021 said it would delay the project to the following year due to the impact of the pandemic.
In its 3QFY2022 ended September 2022 results announcement, Genting Singapore said the RWS 2.0 project is proceeding “expeditiously as planned”. The company cited the construction progress of Minion Land at Universal Studios Singapore as well as the addition and upgrade of other infrastructure facilities required to support the project.
Pivoting towards curated destination experiences, the company noted that it is also investing its assets to attract the affluent market. This includes a complete remake of the Festive Hotel into a boutique-style accommodation, scheduled to reopen in the first quarter of this year.
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Genting Singapore posted strong results for its 3QFY2022, having doubled its earnings and revenue from the previous corresponding quarter.
Its earnings reached $135.8 million versus $60.7 million recorded in 3QFY2021, while revenue stood at $519.7 million, more than double the $251.5 million recorded in the previous corresponding quarter. The strong performance was largely driven by a sharp rebound in overall gaming volumes and an exceptionally high VIP win rate of 4.8%.
DBS Group Research analyst Jason Sum said the results handily surpassed expectations. The company’s 9MFY2022 adjusted ebitda, which amounted to $521.5 million, accounts for 76.6% of consensus full-year estimates — notably above expectations, given that recovery in 4QFY2022 will be more pronounced.
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In fact, Genting Singapore is UOB Kay Hian’s top pick for gaming counters in the region for its 2023 earnings recovery and capital management upside — backed by its net cash which is equivalent to 27% of its market cap.
Moving forward, Singapore is expected to stage a noteworthy gross gaming revenue (GGR) recovery to more than 70% of pre-pandemic levels this year, boosted by China tourist arrivals. In their Jan 6 report, analysts Vincent Khoo, Jack Goh and Ng Jo Yee noted that China visitors historically made up about 20% of Singapore’s pre-pandemic tourist arrivals from 2018 to 2019, estimating that China tourists contributed to about 20% of Singapore’s GGR.
That being said, Maybank Securities analyst Yin Shao Yang in his Nov 9 report pointed out that it is best not to assume that many Chinese VIPs would return to gamble in Singapore. This is due to China’s outlaw of cross-border gambling, which is punishable by up to 10 years in jail from March 2021.
He highlighted that before 2016, Chinese VIPs used to account for about 50% of RWS’s VIP volume. This has eased 30%–40% as China imposed stricter capital controls in 2016, making it a lot more difficult for Chinese VIPs to remit money out of China to gamble overseas.
