Genting Singapore Shares Fall After Q1 FY2023 Earnings: Should Investors Buy?

May 16, 2023

Leading Singapore tourism stocks have received a boost lately as China’s economy reopens and outbound travel takes off.

One of the biggest perceived Singapore-listed beneficiaries has been Genting Singapore Limited (SGX: G13).

It’s a leading integrated resort developer in Asia that owns and operates Resorts World Sentosa (RWS), one of the most popular tourist attractions in Singapore – which offers a variety of entertainment, dining, gaming, and hospitality options.

It recently reported a more-than-3x jump in its net income during the first quarter of 2023 (Q1 FY2023) to S$129.2 million, from S$40.4 million earned in the same period last year.

Despite the strong financial improvement, Genting Singapore’s share price was down by more than 6% as of writing as it missed analysts’ expectations.

This was particularly noticeable as earnings retreated from the seasonally buoyant Q4 FY2022.

With the pullback seen in its share price, this presents an intriguing question to potential investors: should they seize the opportunity buy Genting Singapore stock amid its share price pullback?

Here are four compelling reasons supporting a “yes” on this front.

1. Resilience of the gaming business

Genting Singapore’s gaming business demonstrated its robustness with a 45% revenue surge, escalating from $234.5 million in the previous year to $339.9 million in Q1 FY2023.

Even though net gaming revenue saw an 8.6% quarter-on-quarter dip due to an unfavourable luck factor, Gross Gaming Revenue (GGR) rose by 12% to S$530 million in Q1 FY2023.

Genting Singapore’s GGR market share is also stable at the 40% level, reflecting durable and balanced competition with Marina Bay Sands, owned by Las Vegas Sands Corp (NYSE: LVS).

2. Sustained recovery despite slower pace

The revival of the non-gaming business was slower than anticipated, primarily attributed to the slump in overseas visitor arrivals and airline capacity constraints.

Nonetheless, the recovery remains robust as the non-gaming segment’s revenue soared by 89% to S$144.4 million in Q1 FY2023, up from S$76.3 million the previous year.

3. Boost from China’s reopening

With China’s reopening, Genting Singapore’s earnings recovery is poised to gain momentum.

Prior to the pandemic, China was Singapore’s leading source of inbound tourists.

The forecasted return of Chinese travellers in 2023 is set to rejuvenate Singapore’s travel-related sectors.

The resurgence and restoration of flight capacity will catalyse Genting Singapore’s earnings recovery.

It is worth noting that prior to the pandemic, Chinese VIPs accounted for about 30% to 40% of RWS’s VIP volume while Chinese tourists accounted for around one-third of RWS’s mass market GGR.

4. Enhancement of appeal through RWS 2.0

Genting Singapore persistently enhances RWS’s allure by broadening its product offerings and targeting wealthier markets.

The Forum at RWS is slated for renovations, which will double its gross floor area to around 20,000 sq metres, and introduce an array of high-end restaurants, specialty shops, and concept stores.

These upgrades, expected to conclude by the end of 2024, coupled with the construction of Universal Studios Singapore’s Minion Land and the Singapore Oceanarium, scheduled for early 2025, are projected to draw in more visitors, contributing to a healthier financial performance.

Better quarters ahead for Genting Singapore

Looking forward, the current pullback in Genting Singapore’s share price offers an enticing investment opportunity.

The normalisation of win rates and the sustained recovery of flight capacity are key drivers that will propel and maintain growth in the forthcoming quarters.

Moreover, the company’s resilience, growth potential, and innovative approaches make it a lucrative long-term investment.

Genting Singapore’s robust balance sheet positions it strongly to reap the benefits from the recovery of the tourism and gaming sectors in Asia as well as opportunities in new markets, such as Japan.

Some of the downside risks include the rising risk of a global recession, which could hurt 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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