Genting Singapore Stock Soars as China Reopening Boosts Share Price
December 7, 2022
Investors hope for a faster reopening in China as the government begins to ease some of the COVID restrictions in many of its cities.
Economists are also bringing forward their projection for China’s exit from the COVID-Zero policy.
According to a survey of economists by Bloomberg, most are expecting to see a shift away from the COVID-Zero policy by Q2 2023.
One of the stocks that has responded positively to China’s reopening news is Genting Singapore Limited (SGX: G13).
In fact, Genting Singapore’s share price has reached its 12-month high of S$0.89 today, representing an increase of 18.4% from a year ago.
Genting Singapore is the owner and operator of the integrated resort at Resorts World Sentosa (RWS).
Strong recovery even before China’s reopening
Genting Singapore’s revenue more than doubled to S$519.7 million in Q3 FY2022 as compared to a year ago, bringing revenue for the 9M FY2022 period to S$1.18 billion.
Despite the strong recovery, revenue remains below pre-COVID levels.
In fact, Q3 FY2022’s gaming revenue of S$382 million is still slightly below the quarterly run rate of S$420 million during the pre-COVID period (FY2017 to FY2019).
Meanwhile, revenue growth for its non-gaming business was even slower and only made up about 70% of the non-gaming revenue levels in FY2017 to FY2019.
This is in line with management’s guidance that non-gaming revenue has yet to recover to pre-COVID levels.
However, the resumption of its signature resort entertainment and lifestyle programme, such as the Halloween Horror Nights at Universal Studio Singapore (USS) in Q4 FY2022, bodes well for the recovery.
Meanwhile, the expected completion of upgrading works at Festive Hotel in 1Q23 will increase room capacity.
China tourists played an important role during pre-COVID era
Prior to COVID-19 pandemic, Chinese tourists accounted for about 30% to 40% of RWS’s VIP volume and one-third of RWS’s gross gaming revenue among the mass market.
The return of Chinese tourists to Singapore will boost both its gaming and non-gaming revenue.
If we see an explosion of pent-up demand in travel among Chinese tourists, then this will trounce the average earnings expectations of analysts and drive further upside for Genting Singapore.
The worst is likely over
Genting Singapore continues to see a gradual recovery in earnings despite lagging behind pre-pandemic levels.
However, the casino operator’s improved financial performance has also boosted its balance sheet.
This will support its dividend payout and the capital expenditure for its RWS 2.0 project.
As we see more evidence of a gradual reopening in China, long-term investors should buy into Genting Singapore as the return to normality will boost both its earnings and dividend.
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.