Yahoo Finance Can Genting Singapore’s Dividends Continue to Rise?
It’s a breath of fresh air to be able to enjoy air travel again.
With borders reopening and economies spluttering to life, tourism and travel are once again regaining some modicum of normalcy.
Blue-chip airline Singapore Airlines Limited (SGX: C6L), or SIA, has reported a strong set of earnings recently while food caterer SATS Limited (SGX: S58) recently swung into the black.
Another beneficiary of the surge in tourism is Genting Singapore Limited (SGX: G13).
The owner and operator of Resorts World Sentosa (RWS) integrated resort (IR) had seen its earnings adversely affected by the pandemic.
As borders gradually reopened and tourists trickled in, Genting Singapore has also seen an uplift in its fortunes.
Can the casino operator continue to raise its dividends? Let’s find out.
A better financial performance
After suffering a tumultuous 2020, Genting Singapore’s financial performance for fiscal 2021 (FY2021) showed significant improvement.
Although revenue stayed flat year on year, net profit more than doubled year on year from S$69.2 million to S$183.3 million.
A final dividend of S$0.01 per share was declared and paid, similar to the prior year.
For the first half of 2022 (1H2022), the group saw revenue jump 20% year on year to S$663.1 million.
The increase was led by a 40.4% year on year surge in hotel room revenue to S$63.6 million as tourist numbers jumped, while attractions revenue more than doubled year on year to S$69.7 million as COVID-related restrictions were eased further.
However, higher utility costs and increased casino tax rates have raised expenses for Genting Singapore.
Along with an impairment loss of S$23.3 million recognised in 1H2022, the IR operator saw its operating profit dip 9% year on year while net profit slid 4% year on year to S$84.4 million.
Despite the weaker net profit, the group generated a free cash flow of S$123.9 million for 1H2022.
An interim dividend of S$0.01 was declared, bringing the trailing 12-month dividend to S$0.02 per share.
There was no interim dividend paid a year ago.
The increase in dividends points to confidence on the management’s part about the group’s future as more people visit its attractions, casino, and hotels.
Improved tourist numbers
There could be more to look forward to in 2H2022.
SIA reported that passenger numbers for the third quarter of 2022 (3Q2022) have surpassed the two million mark each month as more people open their wallets for vacations.
Changi Airport saw 10 million passengers pass through its terminals in 3Q2022, comprising 58.1% of pre-COVID traffic.
For its largest source market, Southeast Asia, traffic exceeded 60% of pre-pandemic visitor volume for the quarter, with Australia, Malaysia, Indonesia, India and Thailand ranking as top traffic markets.
Amid the rise in arrivals and departures, Terminal Two also reopened in mid-October as Changi Airport ramps up its passenger handling capacity in tandem with the strong recovery momentum.
The fourth quarter should see improved passenger flow and sustained tourist numbers as most countries have reopened fully and people are yearning for a long-awaited holiday.
Unveiling RWS 2.0
Genting Singapore is not standing still.
Construction works have started on its multi-year “RWS 2.0” project to refresh and revamp various attractions at the IR.
The total investment commitment is S$4.5 billion.
The Meetings, Incentives, Conventions and Exhibitions (MICE) space and hotels will be upgraded to align with Singapore’s goal to become a global Asian hub.
Festive Hotel will become a “bleisure” hotel that will attract business leisure and work-vacation travellers with co-working spaces and lifestyle offerings.
Hard Rock Hotel and Hotel Michael will also be progressively refurbished.
A new oceanarium will also be constructed that is three times larger than the existing S.E.A Aquarium and is targeted to open by the fourth quarter of 2024.
As for its Universal Studios Singapore (USS) theme park, a new Minion Land attraction will open by end-2024.
These initiatives should help to keep the IR vibrant and continue to attract a healthy mix of locals and tourists to use its facilities.
Get Smart: More dividends will flow in
There’s evidence that Genting Singapore can afford higher dividend payments.
Back in 2019, the group paid out a total of S$0.04 per share in dividends when it generated a net profit of S$688.6 million that year.
Free cash flow that year stood at S$838.6 million.
Should net profit and free cash flow gradually improve back to those levels, investors should see the group increase its dividends in line with its improved results.
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Disclaimer: Royston Yang does not own shares in any of the companies mentioned.
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