Genting Berhad’s (Genting) Genting Singapore (GENS) reported 3QFY23 results that beat expectations on stronger-than-expected recovery in its gaming and non-gaming businesses.
Consequently, Kenanga Research upgrades our FY23-24F net profit forecasts for Genting by 33% and 12%, respectively and maintains its OUTPERFORM call.
However, it keeps its SoP-based TP of RM5.20 as the underlying share prices of Genting and GENS have not changed much, with no adjustment to its TP based on 3-star ESG rating.
“Singapore should continue to welcome over a million visitors each month. We continue to like Genting as a proxy to the reopening of international borders and the return of mainland Chinese tourists.
“Revenue at Genting Singapore has recovered strongly and the momentum is expected to continue. Genting’s earnings should more or less double once spendings on marketing, promotions as well as recruitment stabilises at Resort World Genting and other assets transition from FY23 into FY24,” the research house said.
Kenanga said Genting Singapore has a stellar 3QFY23, as its 9MFY23 adjusted EBIDTA of SGD798 million amounted to 91% of the research house’s full-year forecast and surpassed last year’s 12-month adjusted EBITDA.
“3QFY23 adjusted EBITDA of SGD345 million was nearly (76%) that of 1HFY23 earnings with gaming revenue improving to SGD460m (+13% QoQ, +28% YoY) with nongaming revenue surging even stronger to SGD230m (+22% QoQ, +68% YoY).
“Footfall and spending improved on strong tourist arrivals from the likes of China, India and other countries in Asean region,” it said.
The research house reckons that FY23-24F outlook is positive with visitor arrivals expected to stay strong.
“Genting Singapore is also transforming its Resorts World at Sentosa. Project RWS 2.0 was launched in FY22 to meet an anticipated post-pandemic recovery. Hotel Ora opened in Apr 2023 as a renovated and rebranded Festive Hotel, (asides from works for Forum and Universal Studio Singapore).
“Early this month, application to develop another 228,658 sf of retail space and a 700-room hotel was granted by the Singapore’s Urban
Redevelopment Authority. Therefore, GENS should grow as RWS expands and emerges with new offerings to serve the regional market.”
The risks to Kenanga’s recommendation include non-renewal of licenses, unfavourable prize payout ratios, weak consumer spending amidst high inflation, and products perceived to be socially undesirable.
