Following the release of Genting Singapore’s FY2024 ended Dec 31, 2024 results, analysts at CGS International (CGSI) and DBS Group Research have kept their respective “add” and “buy” calls at unchanged target prices (TP) of $1.05 and 95 cents respectively.
CGSI analyst Tay Wee Kuang notes that the group’s 5.4% y-o-y revenue decline to $612.2 million in the 4QFY2024 was mainly due ongoing renovation works at Resort World Sentosa (RWS), namely at Hard Rock Hotel, the Forum, as well as Universal Studios.
While this had an impact on non-gaming revenues and a spillover effect to the gaming segment, gaming revenue rose 25.9% q-o-q in the period, to which Tay attributes to the normalisation of VIP win rates.
With this, Genting Singapore ’s adjusted earnings before interests, taxes and depreciation (ebitda) improved 7.6 percentage points (ppts) to 36.8% in the 4QFY2024.
“Genting proposed a final dividend of 2 cents per share for 2HFY2024, bringing FY2024 dividend per share (DPS) to 4 cents, back to the pre-Covid level of FY2019,” writes Tay in his Feb 21 report.
With an analyst briefing held on Feb 20, Tay shares that the group’s management has indicated for profitability to be pressured during the 1HFY2025 due to pre-opening disruptions and higher operating expense (opex) from hiring additional staff.
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Tay writes: “The new all-suite hotel which will take the place of Hard Rock Hotel will open onlCGSy in 3QFY2025, while the SEA Aquarium will close its doors for 2.5 months from 2QFY2025 to prepare for the opening of the Singapore Oceanarium in 3Q25F as well.”
He adds that the lifestyle corridor forum will also be gradually opened through the 1HFY2025 to reach around 70% to 80% tenant occupancy by 3QFY2025, following which Genting Singapore’s management expects ‘good incremental’ improvements in earnings.
On the group’s diversification opportunities in Thailand, Tay notes that while the Thai cabinet’s approval-in-principal to a draft Entertainment Complex Business Act on paves the way for the legalisation of casinos in Thailand, he sees the initial proposal of requiring Thai locals to have at least THB50 million ($2.00 million) in fixed deposits to be allowed entry as a “huge entry hurdle”.
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With this, Tay raises his FY2025 and FY2026 earnings per share (EPS) by 6.6% and 1.7% respectively as he cuts his assumptions on Genting Singapore’s depreciation and amortisation expenses, but keeps his adjusted ebitda forecasts.
“Despite macroeconomic uncertainty and heavier capex to come for RWS 2.0, management shared that Genting Singapore will strive to maintain dividend payout, thanks to its strong net cash of $3.6 billion as at end-FY2024, equivalent to around 38% of its current market cap.”
Re-rating catalysts noted by him include bumper quarterly earnings from higher-than-expected win rates and higher tourist arrivals, while downside risks include delayed completion of construction works and higher bad debt recognition.
Meanwhile, DBS analysts Chee Zheng Feng and Jason Sum note that while the group’s 4QFY2024 results beat their expectations, it failed to meet consensus expectations.
On Genting Singapore’s delayed hotel reopening from 1QFY2025 to early 3QFY2025 as well as the S.E.A. Aquarium’s closure in 2QFY2025, Chee and Sum have lowered their FY2025 non-gaming revenue forecast from $1.1 billion to $1.0 billion.
“We also expect margin pressure as operational costs could exceed expectations due to delays and multiple new openings this year. However, we anticipate cost pressures easing in 2026, with earnings growth accelerating from new attractions, luxury rooms, and retail stores,” write the analysts.
They add that while the group’s management is optimistic on its 1QFY2025, it is cautious for the full-year.
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Chee and Sum explain: “Management is pleased with year-to-date (ytd) performance, including Chinese New Year, a peak period. However, unlike Marina Bay Sands (MBS), Genting Singapore remains cautious on 2025, with no plans to drive VIP volumes, as seen in 4QFY2024’s VIP volume slowdown q-o-q versus MBS’ strong growth. Nonetheless, this strategy should help limit provision requirements in 2025.”
The analysts also point out that the initial performance of Universal Studios’ new attraction, Minion Land, has exceeded expectations, and is expected to drive visitorship for the next two to three years.
Overall, barring major disruptions, Chee and Sum remain optimistic about a higher FY2025 dividend, supported by earnings growth and limited capital expenditure (capex) outflows.
While they expect margin pressure due to higher-than anticipated operational costs due to delays and multiple openings, they expect costs to ease in FY2026, with growth accelerating from new attractions, luxury rooms, and retail stores.
“Near-term weakness is likely due to ongoing market share losses to MBS in VIP and mass gaming. However, valuation remains attractive, with limited downside risk supported by the progressive dividend policy, offering a yield of above 5% at the last traded price,” conclude the analysts.
As at 3.00 pm, shares in Genting Singapore are trading 1 cent lower or 1.33% down at 74 cents.
