Citi Research analysts George Choi and Ryan Cheung have kept their &ldquo buy&rdquo call on Genting Singapore as they expect its integrated resort, Resorts World Sentosa (RWS) to be a major beneficiary from the return of Mainland Chinese and Indonesian visitors.

 

The analysts&rsquo report dated July 19 comes on the back of Las Vegas Sands&rsquo results for the 2QFY2023 ended June 30. RWS&rsquo s rival and fellow integrated resort, Marina Bay Sands, reported a set of results that stood in-line with the analysts&rsquo expectations.

 

Despite the still-subdued visits from China, MBS&rsquo s net revenue for the quarter grew by 9% q-o-q to US$925 million ($1.22 billion), which is driven mainly by the ongoing recovery in visitors to Singapore.

 

The resort&rsquo s VIP gross gaming revenue (GGR) grew by 7% q-o-q thanks to the higher VIP hold of 3.71% versus the 1QFY2023&rsquo s 2.96%, although this was offset by the 15% q-o-q decline in volumes.

 

Mass volumes during the three-month period exceeded its pre-Covid-19 level (in the 2QFY2019) by 56%. Slot volumes exceeded its pre-pandemic level by 63%.

 

MBS&rsquo s total mass GGR reached another property high of US$580 million, beating its previous high of US$549 million in the 1QFY2023.

 

Its property ebitda improved by 10% q-o-q to US$432 million, which included a positive &ldquo luck impact&rdquo of around US$19 million. MBS&rsquo s luck-adjusted ebitda of US$413 million during the quarter stood largely in-line with Choi and Cheung&rsquo s forecast of US$421 million.

 

Despite the decent set of results from MBS, Choi and Cheung note that they should not be &ldquo overaggressive&rdquo on their operating leverage expectations for Genting Singapore as operating expenses (opex) inflation is still ongoing in Singapore.

 

To this end, the analysts have lowered their earnings estimates on Genting Singapore for the FY2023 to FY2025 by 2% to 6% to reflect their &ldquo more prudent&rdquo opex assumptions at RWS.

 

The reduced estimates also come on the back of more conservative forecasts on RWS&rsquo s non-gaming revenues due to renovations.

 

&ldquo We expect RWS to take at least a couple of quarters to recover its non-gaming revenues,&rdquo say the analysts.

 

Accordingly, they have also lowered their target price to $1.23 from $1.26 previously.

 

Genting Singapore will be reporting its results for the 1HFY2023 and 2QFY2023 ended June 30 on Aug 10.

 

&ldquo We are forecasting, on a luck-adjusted basis, Genting Singapore to report 2QFY2023 revenue of $520 million and ebitda of $205 million. Our 2QFY2023 ebitda forecast represents a 7% q-o-q improvement,&rdquo write Choi and Cheung.

 

On July 20, DBS announced that it has priced US$400 million worth of seven-year senior unsecured notes due 2030 for Genting&rsquo s Resorts World Las Vegas. The notes carry a coupon of 8.45% per annum (p.a.) and has a reoffer yield of 8.75%.

 

DBS is the joint global coordinator, lead manager and bookrunner for the notes.

 

MAYBANK has trimmed its target price on Genting Singapore : G13 -0.53% to S$1.12 from S$1.18, after cutting its core net profit forecasts for the integrated resort operator.

 

Despite the target price drop, the research team believes recovery for Genting is &ldquo intact&rdquo , as the group is on track to recover to pre-Covid levels in FY2024. It has maintained its &ldquo buy&rdquo call on the counter.

 

The new target price implies a potential upside of 20 per cent from the counter&rsquo s last trading price of S$0.93 as at 2.50 pm on Tuesday (Jul 4). Its shares were down 1.6 per cent or S$0.015 at the time.

 

In a Monday report, Maybank trimmed its core net profit forecasts for FY2023 by 12 per cent, FY2024 by 6 per cent and FY2025 by 9 per cent.

 

Forecasts for earnings before interest, taxes, depreciation and amortisation (Ebitda) were also reduced for FY2023 by 14 per cent, FY2024 by 9 per cent and FY2025 by 8 per cent.

 

The revised Ebitda forecasts came as Genting hired 800 more staff to bring its total staff count to around 8,000 by the end of FY2023. Maybank also expects the group to incur more marketing expenses to attract more Chinese tourists.

 

Notwithstanding the lower Ebitda forecasts, the research team expects Genting to return to FY2019 levels by FY2024.

 

&ldquo This is more meaningful when we consider that gaming tax rates will effectively be five percentage points higher by then,&rdquo said analyst Yin Shao Yang.

 

Yin noted that operations have been improving steadily, with all major operating metrics, such as VIP volume and mass tables gross gaming revenue (GGR), trending higher quarter on quarter.

 

Singaporeans have also been driving the growth of high-margin slot machine GGR. Non-gaming revenue, which dipped 15 per cent in the first quarter of 2023 as Singaporeans travelled abroad during the school holidays, is also recovering.

 

With Chinese visitor arrivals for the first five months of FY2023 coming in at only 20 per cent capacity of pre-Covid levels, there is room for improvement for operating metrics as seat capacity from China recovers, Maybank said.