The ebitda recovery trajectory at Marina Bay Sands (MBS) in 1QFY2023 ended March positively surprised the market, say Citi Research analysts George Choi and Ryan Cheung.

Extrapolating from MBS’s performance, Choi and Cheung expect rival GENS's Resorts World Sentosa (RWS) to enjoy a similar recovery during the quarter.

MBS’s parent Las Vegas Sands reported 1QFY2023 results on April 19. At MBS, 1QFY2023 net revenue increased by 24% q-o-q to US$848 million, mainly driven by the ongoing recovery in market visitation.

For example, Changi Airport's passenger volume in February 2023 reached 78% of 2019 levels.

MBS’s VIP volumes largely recovered compared to 1QFY2019 levels with a higher VIP hold of 2.96%, compared to 1.24% in 4QFY2022.

See also: <a class='gtm_see_also_1_inread' style='text-decoration: underline;' href='https://www.theedgesingapore.com/news/company-news/amid-tourism-recovery-genting-singapore-staying-out-new-overseas-projects?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>From April 19 AGM: Amid tourism recovery, Genting Singapore staying out of new overseas projects</a>

Meanwhile, mass volumes exceeded that of 1QFY2019 level by some 25%.

Slot volume exceeded that of 1QFY2019 by approximately 56%, while total mass gross gaming revenue (GGR) reached an all-time property high of US$549 million during the quarter, exceeding 1QFY2019 levels by 22%.

These numbers were achieved despite the still subdued visitation from China, say Choi and Cheung.

See also: <a class='gtm_see_also_2_inread' style='text-decoration: underline;' href='https://www.theedgesingapore.com/capital/results/genting-singapore-fy2022-net-profit-85-final-dividend-double-previous-year?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>Genting Singapore FY2022 net profit up 85%, final dividend double that of previous year</a>

Property ebitda improved 44% q-o-q to US$394 million, which included a negative luck impact of US$18 million. Luck-adjusted ebitda of US$412 million beats Citi’s forecast of US$371 million, mainly attributable to the higher-than-expected mass and slot volumes.

MBS’s hotel occupancy was largely flat q-o-q at 98%, while room rate rose 8% q-o-q to US$594, 31% higher than that of 1QFY2019.

Some 500 rooms (or 20% of total rooms and suites) were removed from the inventory due to renovation during the quarter. Management expects 400 suites when the hotel renovation project is completed by end-2023, up from 150 suites prior to renovations.

Choi and Cheung see a US$76 target price on Las Vegas Sands, which is listed on the New York Stock Exchange. They also see a target price of HK$37 for Sands China, which is listed on the Stock Exchange of Hong Kong.

What does this mean for Genting Singapore?

GENS is expected to report its 1QFY2023 figures in mid-May.

Choi and Cheung expect that GENS, on a luck-adjusted basis, will report 1QFY2023 revenue of $641 million, a full recovery to 1QFY2019 levels and ebitda of $310 million, or 94% of 1QFY2019 levels.

For more stories about where money flows, <a class='gtm_see_also_3_inread' style='text-decoration: underline;' href='/section/capital?utm_source=website&utm_medium=article&utm_campaign=ONPAGESEO'>click here for Capital Section</a>

Citi’s 1QFY2023 ebitda forecast for GENS represents a 21% q-o-q improvement.

Citi maintains “buy” on GENS with a higher target price of $1.36 from $1.20 previously. “We see RWS as one of the biggest beneficiaries from the Singapore re-opening,” write Choi and Cheung in an April 20 note.

In February, GENS reported net profit of $340.1 million for FY2022 ended December, 85% higher y-o-y, as profit before tax more than doubled during the year. Revenue grew 62% y-o-y during the period to $1.7 billion, while cost of sales grew 52% y-o-y to $1.1 billion.

As a result, GENS proposed a final dividend of 2 cents per ordinary share, double the final dividend paid the year prior. Together with the 1 cent per share interim dividend declared in 1HFY2022, Genting Singapore’s full-year dividend for FY2022 is 3 cents per share.

Choi and Cheung forecast that the Singapore gaming industry ebitda will remain at $3.3 billion per annum in a normal GGR year in the medium term. “The Singapore gaming market and GENS, the only pure Singapore gaming play, could appeal to investors who are looking for a defensive shelter in volatile markets. Furthermore, we believe the new phase for RWS could help GENS to retrieve its earnings growth.”

A newly renovated Festive Hotel will be relaunched in May as a lifestyle destination hotel, adding 389 rooms to the resort’s overall hotel inventory. Slated for completion in late 2024, the Forum and Coliseum, with more than 20,000 sq m of commercial space, will undergo major transformation, says Genting Singapore.

Non-gaming revenues will be key focus for GENS: CGS-CIMB

CGS-CIMB Research analyst Tay Wee Kuang has kept his "add" call on GENS with a higher target price of $1.26 from $1.15 previously. Tay's report, like his counterparts at Citi, note the positive read-through from MBS's 1QFY2023 results with GENS possibly following suit.

"A similar growth trend for GENS could see its adjusted ebitda reach $273 million in 1QFY2023, in line at 27%/25% of our/consensus FY2023 forecasts," Tay writes.

In his report, Tay notes that the lag in international visitor arrivals imply more room to grow as flight capacities to and from China are gradually reinstated.

Plus, GENS's non-gaming revenues could see faster improvement due to the stronger recovery of Asean tourists. Furthermore, the reopening of Festive Hotel in May, ongoing construction of Minion Land and the Singapore Oceanarium that will be completed between 2024 and 2025 should help to refresh its non-gaming offerings to tourists, says Tay.

In addition to his higher target price, Tay is increasing his adjusted ebitda for FY2023, FY2024 and FY2025 by 2.7%, 9.8% and 8.8% on stronger mass gaming revenues and with the belief that Singapore's tourism sector could surpass pre-Covid-19 levels.

Despite the positives, Tay is removing GENS from his high conviction list as its recent share price outperformance translates to a less attractive dividend yield of around 3% for FY2023.

"Re-rating catalyst: swifter recovery of the tourism industry; downside risks: loss of market share and recession," writes Tay.

Shares in Genting Singapore closed 1 cent higher, or 0.88% up, at $1.14 on April 20.

Analysts up Genting Singapore's target price following MBS's 1QFY2023 outperformance

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