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Analysts mixed on Genting Singapore following underperformance versus rival Marina Bay Sands

·4-min read

RHB analysts saw disappointing footfall at RWS’s premise and casino, versus the large crowds at MBS and its casino.

Analysts from UOB Kay Hian, RHB Group Research, Maybank Securities and CGS-CIMB Research are mixed on Genting Singapore as its 2QFY2022 performance paled in comparison to Marina Bay Sands’ (MBS) performance for the same period.

RHB analysts, who have downgraded their “buy” call to “neutral” point out that Genting Singapore’s 1HFY2022 core profit made up 36% of its FY2022 estimates while revenue and adjusted EBITDA came in at 44% and 42% of its forecasts respectively.

“The q-o-q gross gaming revenue (GGR) growth of 2.7% was disappointing compared to MBS’s q-o-q GGR growth of 84%,” the analysts add.

Maybank analyst Yin Shao Yang, who also downgrades his “buy” call to “hold” explains that the shortfall was largely due to an unusually low 2QFY2022 VIP win rate of 1.5%. Adjusted for normal VIP win rate, 2QFY2022 EBITDA would have been 27% higher at $182.2 million or more than 70% higher q-o-q.

In the long term, VIP win rate will average at the theoretical average, says Yin. “More importantly, the stable and higher margin 1HFY2022 industry mass market GGR recovered to 75% of 1HFY2019 levels. In fact, we gather that 2QFY2022 industry mass market GGR recovered to about 90% of 2QFY2019 levels.

“Singapore reopened borders on April 1 and axed Covid-19 testing requirements on April 26. 1HFY2022 Resorts World Sentosa (RWS) share of mass market GGR eased 8 percentage points h-o-h to 37% but we expected this,” he says, tweaking his discounted cash flow-based target price to 86 cents from the previous 85 cents.

Further adding to the comparison of the two rivals, RHB analysts saw disappointing footfall at RWS’s premise and casino, versus the large crowds at MBS and its casino. The analysts said half of the tables in the RWS casino were empty on a Sunday afternoon when they visited the premises.

“From our conversations with RWS staff, we gathered that there has been a return of Asean tourists, but a noticeable lack of northern Asian (China) tourists. We observed that most of the patrons in RWS were locals, while those at MBS were more diverse, including crowds from southern Asian countries,” the RHB analysts add, lowering their target price to 90 cents from the previous 95 cents.

To this end, UOB analysts Vincent Khoo and Jack Goh retain their view that China’s eventual border reopening remains as a strong rerating catalyst on Genting Singapore to restore its pre-pandemic earnings dynamic. China visitors historically make up about 19%-20% of Singapore’s pre-pandemic tourist arrival in 2018-2019.

“We think that Chinese footfall made up about 20% of RWS’ footfall and 20%-25% of Genting Singapore’s top-line revenue. Moving forward, we expect China to ease travel restrictions from 4QFY2022-1QFY2023 onwards. China’s pent-up demand may allow Genting Singapore to potentially deliver above pre-pandemic earnings that could trounce our earnings estimates,” they add.

Khoo and Goh maintain “buy” on Genting Singapore with an unchanged target price of $1.08, implying 8x 2023 EV/EBITDA.

Meanwhile, CGS-CIMB analyst Tay Wee Kuang, who has an “add” call on Genting Singapore with a higher target price of $1.04 from 92 cents previously highlights that the management is confident of a gradual demand recovery over the next 12-18 months.

In the near term, Genting Singapore has 50 Meetings, Incentives, Conferences and Exhibitions (MICE) events planned for 2HFY22 — about one-third of which are large-scale events, he adds. “Further out, the tourism and hospitality industry is set to see further recovery as airlines step up efforts to reinstate capacity, which could lower airfares and further drive demand for travel.”

Genting Singapore is also in the midst of ramping up its hiring efforts to cater to the robust recovery in demand. It is looking to add about 1,500 additional staff to the current headcount of about 5,000 by the end of the year, but will be closely monitoring cost pressures to strike a balance between revenue growth and profitability, says Tay.

As at 3.56pm, shares in Genting Singapore are trading 2.5 cents lower or 3.03% down at 80 cents.


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