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Placing a bet on 'beyond pandemic' recovery with Genting Singapore

Nicole Lim
Nicole Lim • 5 min read
Placing a bet on 'beyond pandemic' recovery with Genting Singapore
Investor sentiment is boosted after Genting’s net income surged 59% in 3QFY2023, and with the visa-free arrangement with China. Photo: Bloomberg
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Genting Singapore’s Resorts World Sentosa (RWS) is capitalising on the city-state’s post-pandemic reopening. This is evident in its 3QFY2023 results, which recorded the most significant earnings leap in three years. Quarterly sales and net income soared by 33% and 59% y-o-y, showcasing the company’s strong performance.

The resort operator reported “a clean earnings beat, after a long time, where ebitda finally exceeded pre-Covid-19 levels as Genting re-gained share from rival Marina Bay Sands”, JPMorgan Chase & Co analysts wrote in a November 2023 note.

Genting Singapore’s fate is closely intertwined with Singapore’s tourism sector. Alongside Marina Bay Sands (MBS), managed by US-listed Las Vegas Sands Corp, these two integrated resorts (IRs) have consistently attracted millions of visitors and generated substantial revenue since their inauguration over a decade ago.

The tourism industry here is expected to sustain its rebound. A report from the Singapore Tourism Board (STB) on Feb 1 highlighted a robust recovery, with the sector reaching 13.6 million visitors in 2023, approximately 71% of the 2019 levels. This aligns with STB’s projected 12 million to 14 million visitors.

Tourism receipts, which are expenditures by international inbound visitors, are estimated to reach $24.5 billion to $26 billion, surpassing STB’s forecast of $18 billion to $21 billion set out in 2023. The city-state was most visited by Indonesia, with 2.3 million tourists, followed by China at 1.4 million and Malaysia at 1.1 million. Other key markets that posted buoyant recovery included Australia, South Korea and the US, notes STB.

See also: How our 2023 top 10 SGX stocks performed

Gaming revenue 

Economists from Maybank have described the tourism recovery of 2023 as a “tale of two halves” in which recovery lost steam in the second half of the year largely due to the shortening of China’s revenge travel habits. 

“Tourist arrivals to Asean grew 388% in the first six months of 2023 but slowed to 67% from July to November. At 77% of pre-pandemic levels in November 2023, total visitor arrivals to Asean were modestly higher than at the start of 2023, which stood at 61% in January,” the economists note in their Jan 19 report. 

See also: Frasers Property to improve earnings, dividends and returns

Various factors have deterred Chinese tourists, including consumer belt-tightening due to a weak economic climate, restricted international flight capacity, expensive airfares for overseas routes and perceived challenges in visa applications.

The extent of Genting Singapore G13 -

’s exposure to reduced tourist arrivals is yet to be determined and a more comprehensive assessment is anticipated when the full-year figures are disclosed later this month.

On Jan 6, Maybank analyst Yin Shao Yang noted that the mass market segment of Chinese tourists, historically responsible for around 75% of Genting Singapore’s earnings, had already rebounded to pre-Covid-19 levels before 3QFY2023, despite the absence of Chinese tourists.

“The return of Chinese tourists en masse in 3QFY2023 drove mass market gross gaming revenue to 8% above the FY2019 quarterly average and VIP volume to 36% above the FY2019 quarterly average. The 3QFY2023 VIP volume of $11.3 billion was the highest since 2QFY2015,” he adds.

The analyst expects this growth to consolidate and continue in FY2024 as seat capacity for flights from China to Singapore recovers. Citing official data, Yin notes that the December 2023 seat capacity from China to Singapore currently stands at 87% of December 2019 levels.

Optimism for tourism rebound 

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On Jan 25, Singapore and China revealed plans to implement a reciprocal 30-day visa-free arrangement starting from February 9, the day before the Lunar New Year.

This development has been a significant factor for several analysts, including Yin, who express optimism about the resurgence of Chinese tourists in the city-state.

“Singapore also recently granted 30-day visa-free entry to Chinese visitors. We hope the Chinese visit to RWS will recover completely this year. In the long term, we expect RWS’s VIP volume and mass market gross gaming revenue to exceed 2019 by about 20%,” says Yin.

In their Jan 19 note, Maybank economists predict a “less sizzle in 2024” but anticipate a strong recovery. They highlight increased flight capacity, reduced airfares and visa waivers for Chinese citizens as factors that will bolster a more pronounced tourism recovery. They project that recovery rates will revert to pre-pandemic levels by late 2025.

Maybank’s Yin suggests Genting Singapore might join the bidding for a Thai IR licence if Thailand opens its IR industry.

While acknowledging potential competition from Thai IRs, Yin adds that historically, Genting Singapore has not hesitated to explore overseas expansion as a strategic response to competition.

The resort operator also launched its ambitious $6.8 billion plan to refresh and revitalise its offerings and grow its proportion of non-gaming revenues, higher than the $4.5 billion indicated in April 2019. 

Casino operators generally derive a significant portion of their earnings from gaming, but increasing non-gaming revenue is always beneficial. In 3QFY2023, Genting Singapore reported gaming revenue of $459.6 million, complemented by $230.1 million in non-gaming revenue.

Rejuvenation plans 

The multi-billion upgrades planned for RWS and MBS by Las Vegas Sands are integral to the exclusivity deal inked with the republic.

As part of the $6.8 billion RWS plans to spend, it will build a new waterfront hotel with around 700 rooms and bring in higher-end retail offerings. These upgrades, especially the addition of high-end suites, aim to elevate room rates and draw more tourists.

Additional attractions, such as Minion Land in Universal Studios Singapore and the Singapore Oceanarium, are part of the upcoming enhancements. The Forum, the central retail and F&B area of RWS is also set for a significant transformation. The increased capital expenditure is scheduled for spending until FY2031, as opposed to the previously planned FY2028 and FY2029.

Following the 4QFY2023 results of rival MBS, which witnessed a 5% q-o-q surge in casino revenue to US$1.06 billion ($1.4 billion), investor sentiment toward this sector has become more optimistic.

According to Bloomberg data, as of Jan 31, there are 15 out of 20 active calls on this stock with 83.3% “buy”; 16.7% “hold” and zero “sell”. Two analysts hold the highest price target, Tushar Mohata of Nomura and Sue Lin Lim of CLSA, at $1.26, while Jennifer Song from Morningstar is the most bearish with a target price of 98 cents. 

The consensus average for all the active calls is $1.17, representing a 15.8% return potential, based on the stock’s last traded price of $1.01.  


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