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Analysts expect Genting Singapore to see a better 3QFY2022 after positive surprise from rival MBS

Bryan Wu
·4-min read

UOB Kay Hian has kept ‘overweight’ on the gaming sector and ‘buy’ on Genting Singapore. Citi has also kept ‘buy’ on Genting.

Analysts are positive on Genting Singapore’s (GENS) prospects after NYSE-listed Las Vegas Sands Corporation revealed that Marina Bay Sands’ (MBS) adjusted ebitda surged by 2,187% y-o-y to US$343 million ($475.6 million) for the 3QFY2022 ended Sept 30.

UOB Kay Hian Research analyst Vincent Khoo has maintained his “overweight” rating for the gaming sector, citing Marina Bay Sands’ (MBS) “impressive” 3QFY2022 gaming revenue recovery.

In his report dated Oct 20, Khoo notes that MBS’ 3QFY2022 net gaming revenue recovered 3.5% q-o-q to reach 94% of pre-pandemic levels.

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Similarly, he expects GENS’s gaming revenue to recover significantly in 3QFY2022 in tandem with the influx of international visitors to Singapore following the removal of most pandemic-related social distancing measures and border restrictions.

He adds that GENS’s Resorts World Singapore (RWS) will benefit from Singapore’s overall pent-up tourism demand in 3QFY2022 which will lift its hotel occupancy and average room rates, although RWS’s volume dynamics will trail MBS’s to partly reflect reduced hotel capacity.

“With the world eventually fully unwinding Covid-19 curbs, we expect GENS’s ebitda to claw back to the pre-pandemic level of $1.2 billion in FY2023,” says Khoo

Khoo believes the sector will deliver 80% to 90% gross gaming revenue (GGR) growth in 2022 and maintains his “buy” call on GENS with a target price (TP) of $1.08, which implies an 8.8x FY2023 enterprise value/ebitda at 0.5 standard deviations (s.d.) below the mean.

“We continue to expect cash-flushed GENS, whose net cash accounts for 33% of its market cap, to engage in significantly better capital management moving forward and to offer an attractive prospective yield of 5.1% to 5.8% in 2023,” says Khoo.

Meanwhile, Citi Investment Research analysts George Choi and Ryan Cheung have also maintained their “buy” rating for Genting Singapore with a TP of $1.01, which they believe to be one of Singapore’s “reopening plays”.

“The ebitda recovery trajectory in 3QFY2022 at its rival MBS positively surprised the market, and we expect GENS’s Resorts World Sentosa to enjoy a similar recovery during the quarter,” say the Citi analysts.

They are “conservatively” forecasting GENS to report an ebitda of $217 million for 3QFY2022, implying a recovery to 78% of its pre-pandemic levels, similar to MBS’s results.

In his report, Khoo notes that MBS’s adjusted ebitda of US$343 million was the best quarter since the onset of the pandemic.

“This was supported by excellent local patronage and the mass market segment with volume recovering to over 100% of pre-pandemic levels, as well as the strong recovery of international visitor numbers and the VIP market segment, with volume recovering to 83% of pre-pandemic levels,” says the analyst.

On a constant currency basis in Singapore dollars (SGD), Khoo points out that MBS’s 3QFY2022’s mass market for table and slot GGR rose 156% y-o-y and 10% q-o-q, while VIP GGR surged 1221% y-o-y and 4% q-o-q.

For MBS, Citi’s Choi and Cheung say that even if the positive luck impact of around US$9 million is removed, the luck-adjusted ebitda of US$334 million would still beat their forecast of US$308 million.

They add that MBS’s hotel occupancy increased to 96% compared to 94% in 2QFY2022, while room rates rose significantly by an estimated 56% q-o-q to around US$515, 8% higher than that of 3QFY2019, while 500 rooms were removed from the inventory due to renovation during the quarter.

For Khoo, he retains the view that China’s eventual border reopening remains as a strong re-rating catalyst for the gaming industry. “While we deem that Singapore’s swift international patronage recovery to pre-pandemic levels coupled with resilient local visitations will continue to drive earnings recovery,” he says.

As at 1.35pm, shares in Genting Singapore were trading 0.5 cent lower or 0.63% down at 78.5 cents.

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