Get the ULTIMATE guide on how to invest successfully in Singapore REITs + our Top 5 S-REIT picks! Download now
Genting Singapore Stock: Buying Opportunity on the Back of Tourism Recovery
August 14, 2023
As the global economy begins to reopen, the focus of Singapore investors is naturally shifting towards industries that are poised to capitalise on the recovery.
That’s particularly true of the sectors most heavily impacted by the pandemic – namely tourism.
The tourism industry stands out as one that has significant potential for growth as travel restrictions ease, consumer confidence returns and tourists from around the region flock to Singapore.
Within this context, Genting Singapore Limited (SGX: G13) has emerged as a subject of attention and an appealing investment opportunity.
Genting Singapore, a key player in the gaming and entertainment sector in the city state, has shown robust signs of recovery along with the resurgence in tourism in the Lion City.
After a tumultuous period brought about by the Covid-19 pandemic, the company has been showing robust signs of getting back to business as usual.
Here are some of the details of why investors in Singapore should be taking a closer look at Genting Singapore stock.
1. Earnings supported by robust growth
In Q2 2023, Genting Singapore reported a remarkable 23.0% growth in revenue from its previous quarter, reaching its highest level since Q4 2019, at S$595.9 million.
This was driven by 19.7% quarter-on-quarter (qoq) growth in gaming and 26.3% qoq in non-gaming segments.
The strong recovery helped to boost revenue growth to 63% year-on-year (yoy) – to S$1.08 billion – in H1 2023.
The gaming revenue’s growth was partially spurred by a favourable luck factor in VIP games, while gross gaming revenue (GGR) also improved 3% qoq.
Simultaneously, the non-gaming segment was boosted by an increase in visitors to its attractions and a higher spend per customer.
Overall, the Group’s net profit jumped by more than three times to S$276.7 million during H1 2023.
2. Potential for further growth
With flight capacity from China and India, the two key markets for Genting Singapore, still below pre-Covid levels, there is potential for further revenue growth.
Recovery in these segments has already reached 97% and 92%, respectively, and a further improvement in flight capacity is likely to support continued revenue momentum in H2 2023.
In H1 2023, Genting Singapore had a slow start but now Chinese visitors are coming back in large numbers.
Data from July 2023 show that seat capacity from China to Singapore is now at 74% of what it was in July 2019.
Genting Singapore expects H2 2023 to be better than the first half, unless there is a global recession.
3. Strong cash flow to fund dividends and capex
Genting Singapore’s strong cash position remains relatively unchanged in H1 2023, even after substantial dividends and capital expenditure (capex).
This points to solid financial management and cash flow, which supports the ongoing capex for its Resorts World Sentosa (RWS) expansion plan, also known as RWS 2.0.
The healthy cash position has enabled a dividend of 1.5 Singapore cents per share for H1 2023, demonstrating management’s confidence in supporting ongoing capital requirements.
4. Local tourism remains supportive of growth
Genting Singapore is seeing positive signs in visitor trends and spending.
The local crowd is holding steady, and there is a notably higher number of tourists visiting and spending in Singapore.
Even though June is a peak travel month for Singaporeans, local visits have remained strong and resilient.
The average spending among local Singaporeans remained higher than it did before the pandemic.
Aside from that, the group has not noticed any significant shift of visitors going to Macau as opposed to their Singapore venues currently.
5. Potential to surpass pre-COVID profitability
The strong earnings in H1 2023 provide an optimistic outlook for Genting Singapore.
As Genting Singapore is expected to continue to benefit from the recovery in the tourism industry, there is a potential to surpass pre-COVID profitability by FY2024.
This would support a higher dividend payout and a return to normalised profitability for the casino operator.
Genting Singapore stands out as promising investment opportunity
Genting Singapore stands out as a resilient and promising investment opportunity for Singapore invetsors.
With robust revenue growth across its segments, strong cash generation to fund dividends and capex, and a likely surpassing of pre-Covid profitability levels, Genting Singapore is a good investment opportunity for investors.
While the prospects look bright, investors should be cautious about potential downside risks.
Elevated airfares may dampen travel recovery, while shifts in tourism dynamics may lead to tourists opting for more budget-friendly destinations, possibly affecting visitor numbers to RWS.
Investors looking for growth and dividend income should consider Genting Singapore as a potential addition to their portfolios, keeping an eye on the mentioned risks.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.