Introduction

Genting Singapore, a key player in the regional leisure, hospitality, and integrated resorts development sector, recently reported its 3Q24 financial results. Despite facing several challenges, there’s still optimism about its future prospects. This report delves into the company’s performance, financial metrics, and future projections.

Company Overview

Genting Singapore is a prominent name in the consumer discretionary sector, focusing on leisure, hospitality, and integrated resorts. The company is listed on the Singapore Stock Exchange under the ticker GENS SP and has a market capitalization of S\$10,140.5 million.

3Q24 Financial Performance

The 3Q24 results for Genting Singapore were below expectations, reflecting a sharp decline in gaming revenue and weaker gaming volumes in both the VIP and mass segments. The VIP win rate was exceptionally low, offsetting the improvements in the non-gaming segment.

Key Financial Metrics

• Revenue: S\$561.9 million, down 1.6% QoQ and 18.5% YoY.
• Gaming Revenue: S\$330.0 million, down 13.5% QoQ and 28.2% YoY.
• Non-Gaming Revenue: S\$231.8 million, up 25.3% QoQ and 0.7% YoY.
• Core Adjusted EBITDA: S\$163.9 million, down 18.5% QoQ and 52.5% YoY.
• Core Net Profit: S\$90.9 million, down 17.5% QoQ and 57.8% YoY.
• Adjusted EBITDA Margin: 35.2%, down 11.9 percentage points QoQ and 8.5 percentage points YoY.

Detailed Analysis

Gaming Segment

The gaming segment experienced a significant downturn due to lower visitations and an exceptionally weak VIP luck factor. Gaming revenue decreased by 14% QoQ and represented only 81% of pre-pandemic levels. VIP gross gaming revenue (GGR) fell by around 18% QoQ, while mass GGR declined by 6% QoQ.

Non-Gaming Segment

In contrast, the non-gaming segment showed resilient improvement. Revenue surged by 25% QoQ and 1% YoY, despite a reduced number of available rooms due to renovations. Hotel occupancy rates improved slightly to 86%, with an average room rate of S\$520.

Stock Impact and Future Projections

Tourist Arrivals

Tourist arrivals in Singapore recovered to around 88% of pre-pandemic levels in 3Q24. Although international visitor arrivals were flat in October, there’s optimism for steady improvement in 4Q24-2025 as intra-Asia flight capacities are restored.

Growth Trajectories

The company is expected to continue its sequential earnings growth, driven by several positive catalysts including accelerated recovery in foreign visitations, upcoming mega entertainment events, higher spending per capita in Resorts World Sentosa (RWS), and intensified marketing efforts.

Thailand Casino Legalisation

Thailand’s draft of the Entertainment Complex Act, which may legalise casino operations, is undergoing public consultation. If Genting Singapore secures a Thailand casino license, it could significantly boost mid-to-long-term earnings and growth prospects.

Expansion Plan

RWS has revised its expansion plan, committing S\$6.8 billion to elevate the resort’s vibrancy. Key developments include the completion of Hotel Ora, ongoing construction of Minion Land and the Singapore Oceanarium, and the addition of 700 hotel rooms.

Healthy Balance Sheet

With a net cash position of S\$3.6 billion, Genting Singapore has the flexibility to explore further opportunities. The company may also consider other brownfield and greenfield opportunities in the region.

Earnings Revision

The 2024-25 EBITDA forecasts have been reduced by 16% and 7%, respectively, to account for the poor VIP luck factor and slower-than-expected international patronage recovery.

Valuation and Recommendation

The recommendation for Genting Singapore remains a “BUY,” with a revised target price of S\$1.12. This target price implies a 9.3x 2025F EV/EBITDA, which is 0.5 standard deviations below the mean.

Key Financial Projections

Conclusion

Despite facing unexpected setbacks in 3Q24, Genting Singapore remains a promising investment with significant capital upside. The company’s solid non-gaming segment performance, healthy balance sheet, and strategic expansion plans are key factors driving future growth. Investors are encouraged to maintain a positive outlook, keeping an eye on the company’s progress and market conditions.