The “nascent return” of Chinese customers as airline traffic continues to increase bodes well for Genting Singapore, ensuring there is “a lot of room for gaming operations to improve,” according to Maybank analyst Samuel Yin Shao Yang.
In a Monday note following publication of Genting Singapore’s 1Q23 results late last week, Yin noted that the company’s prospects for the year ahead remained strong despite low hold and seasonal weakness at its Singapore casino, Resorts World Sentosa (RWS), pushing EBITDA down by 25% on the December 2022 quarter.
On a hold-normalized basis, the analyst observed, gaming operations at RWS ramped further in 1Q23 to fall within expectations. More importantly, “With seat capacity from China to Singapore recovering hastily, there is a lot of room for gaming operations to improve,” Yin said.
“Seat capacity from China to Singapore will improve further (May 2023: 51% of May 2019 levels) to ~65% of 2019 levels by mid-year. This should lower airfares and encourage more Chinese to gamble in Singapore.
“Furthermore, the newly renovated 389-room Hotel Ora reopened in April 2023. This will allow Genting Singapore to ‘comp’ more rooms to attract premium gamblers.”
In a separate note, Nomura analysts Tushar Mohata and Alpa Aggarwal said the soft Q1 results could lead to a “negative knee-jerk reaction” but insisted they remain positive on Genting Singapore’s prospects.
“Inbound Chinese tourism still stood well below pre-COVID levels in 1Q23, and is only recovering gradually, due to slow flight capacity ramp-up, and high airfares,” they wrote. “That said, we think they remain on the path to sustained recovery in 2H23 and FY24.”
Yin added that non-gaming revenue is seasonally weakest in Q1, compressing margins, but he still estimates FY23 revenues at RWS to come in at SG$2.29 billion – up 33% year-on-year – and net profit at SG$721 million, up 93%.
Both Maybank and Nomura have retained their “BUY” rating on Genting Singapore shares.
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