RHB Group Research analysts have raised their target price for Genting Singapore, citing an improved outlook for the integrated resort operator due to border reopening and less likelihood of further COVID-19 lockdowns.
According to a research report published late last week, the target price has risen 5 cents, from SG$0.90 to SG$0.95, based on an EV/EBITDA multiple of 8.5x compared with the previous 7.9x.
“The higher multiple reflects Genting Singapore’s better and more certain prospects, as Singapore begins to treat COVID-19 [as] endemic, reducing the probability [of] future strict lockdowns,” the analysts said.
“We believe the pent-up demand for international travel will drive the return of tourists from Genting Singapore’s traditional markets in ASEAN and Northern Asia, which account for approximately 60% to 70% of its visitor numbers prior to the pandemic.”
RHB Group Research also expressed little concern over the company’s capex requirements, with Genting Singapore having recently announced it will begin upgrade works on three of its hotels at Resorts World Sentosa during 2Q22, part of a SG$400 million (US$287 million) investment it plans to inject into the property this year.
The upgrade works form part of the company’s broader RWS 2.0 expansion plans, having announced in 2019 that it will spend a total of SG$4.5 billion to add around 164,000 square meters of new leisure and entertainment space to its current offerings.
“We note that the majority of the costs will likely be backloaded in 2H24 ending December 2024 and FY2025,” the analysts said. “While plans for funding are not set in stone, Genting Singapore will likely tap on internal resources and cash balance of net cash SG$3.1 billion [as of 4Q21] for this.”
Genting Singapore shares closed at SG$0.81 on Friday.
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