Genting Singapore Shares are Down 18%. Is it a Bargain Buy Now?

June 21, 2023

When it comes to investing, the sage advice to “buy low, sell high” remains timeless.

Currently, Genting Singapore Limited’s (SGX: G13) share price has been on a downtrend since it reached its one-year high of S$1.18 in April this year.

At Genting Singapore’s current level, this represents a decline of 18% from its recent high.

Despite the dip, it is crucial to look beyond immediate stock market fluctuations and instead focus on the business opportunities and growth prospects.

For Genting Singapore, I believe the ongoing recovery in the tourism industry will benefit the casino operator and at its current value, it represents a value buy for investors who are looking to hold over the medium to long term.

Here are five reasons why I think Genting Singapore remains a compelling investment right now.

1. Resilience in casino business

One of the key takeaways from Genting Singapore’s recent earnings results was the resilience of its casino business, or gaming revenue.

The Group’s gross gaming revenue (GGR) has maintained its growth momentum as it recorded a 12% improvement quarter-on-quarter.

This was despite non-gaming revenues having been affected by the limited visitor arrivals from North Asia.

2. Stable competition in Singapore

One of just two casino operators in Singapore, Genting Singapore operates Resorts World Sentosa (RWS).

This has allowed the company to maintain stable competition dynamics in Singapore with its primary competitor being Marina Bay Sands, which is owned by Las Vegas Sands Corp (NYSE: LVS).

Such stability suggests that Genting Singapore has a robust business model and is well-equipped to withstand competitive pressures.

3. Future-ready infrastructure and renovation

Genting Singapore is currently working on significant renovation projects such as the RWS 2.0 works, which include transforming the Festive Hotel into Hotel Ora, and revamping Hotel Michael and Crockfords Towers.

Furthermore, extensive transformations of The Forum, the introduction of Minion Land and the Singapore Oceanarium are also in the pipeline, with no disruptions reported so far.

These initiatives, aimed at increasing the appeal of its offerings, show Genting Singapore’s commitment to continuous improvement and future growth.

4. Potential dividend growth

Genting Singapore has a decent dividend yield of 4.15% at its current level.

This is supported by its strong balance sheet position and improved cashflow.

Genting Singapore’s cash position of S$3.5 billion dwarfs its debt level of around S$5.5 million.

Aside from that, the company’s operating cash flow improved to S$806.7 million in FY2022 as compared to a net operating cash flow of S$377.7 million in the previous year.

With the gradual recovery in the tourism industry, the cash flow and balance sheet should improve further, allowing the potential for an increase in its dividend payout.

5. Recovery of tourism industry

Finally, we have continued to see a recovery in the tourism industry in Singapore. A swifter recovery of the tourism industry will serve as a significant re-rating catalyst for the stock.

Given the promising outlook for the global economy as it recovers from the effects of the pandemic, Genting Singapore stands to benefit considerably from an uptick in tourism.

Genting Singapore offers a mix of growth and dividends

Genting Singapore currently presents an attractive investment opportunity to investors looking for both growth and dividends.

At its current level, it offers a decent dividend yield of 4.15%.

The average target price for Genting Singapore is at S$1.11, representing upside of around 16% from its current level.

The strategic initiatives undertaken by the management team, its robust gaming segment and positive future growth prospects make it a compelling consideration for investors.

However, it is important to take note of risks such as potential loss of market share or if a global recession hurts the tourism industry.

Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.

Billy Toh

Billy is deeply committed to making investment accessible and understandable to everyone, a principle that drives his engagement with the capital markets and his long-term investment strategies. He is currently the Head of Content & Investment Lead for Prosperus and a SGX Academy Trainer. His extensive experience spans roles as an economist at RHB Investment Bank, focusing on the Thailand and Philippines markets, and as a financial journalist at The Edge Malaysia. Additionally, his background includes valuable time spent in an asset management firm. Outside of finance, Billy enjoys meaningful conversations over coffee, keeps fit as a fitness enthusiast, and has a keen interest in technology.

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