Singapore lift for Genting
Elevated earnings recovery momentum in 3Q22 seen
PETALING JAYA: Amid cautious market sentiment over fears of a global recession, shares of Genting Bhd, and its 49.5%-owned Genting Malaysia Bhd have been holding up fairly well as investors bet on an “meaningful earnings recovery” with the easing of preventive restrictions across the gaming group’s key markets.
UOB Kay Hian (UOBKH) Research said it expects the Genting Group to elevate its earnings recovery momentum in the third quarter of financial year 2022 (3Q22), leveraging on continuously strong local patronage, better international visitations and full restoration of operating capacity.
“Furthermore, Genting Malaysia’s Resorts World Genting (RWG) is also primed to benefit from the ramping up of its hotel capacity to over 7,600 rooms (2Q22: 6,000 rooms) and resilient patronage during several holidays in 3Q22.
Meanwhile, Genting’s earnings will also be lifted by stronger performance from Resorts World Sentosa (RWS) which will benefit from Singapore’s pent-up tourism demand, higher hotel occupancy and average room rates,” the research firm said in a gaming sector report.
Last week, Genting Singapore Ltd, which is 52.63%-owned by Genting, saw its net profit double sequentially to S$132.3mil (Rm44.2mil) for the 3Q22 ended September.
Revenue, meanwhile, surged 49% from better contributions of its affluent and premium customers. At 87% of pre-pandemic levels, analysts said this was Genting Singapore’s best quarterly revenue since the Covid-19 outbreak in 2020.
Genting and Genting Malaysia are expected to release their 3Q22 results later this month.
According to UOBKH Research, its channel checks revealed that footfall to RWG during the recent public and school holidays was comparable to pre-pandemic levels.
It said re-rating drivers include the combination of a sharp earnings recovery with accompanying lush dividend yields, and specific to Genting Malaysia is potentially securing a downstate New York concession.
Meanwhile, Kenanga Research has raised Genting’s FY22 and FY23 forecast earnings by 21%/19% to reflect the stronger than expected results from Singapore.
“Singapore registered a 91% quarter-on-quarter surge in tourist arrivals to 2.04 million in 3Q22 as opposed to pre-border reopening arrivals of only 246,000 in 1Q22.
“We expect another solid quarter in 4Q22 given the year-end seasonality,’ said Kenanga Research.
It said based on Genting Singapore’s quarterly business overview note, “we sense improved sentiment as the company is confident and excited about growth opportunities where RWS 2.0 expansion is proceeding expeditiously as planned”.
But for now, it was keeping its outperform rating on Genting with a RM5.86 target price.
This was a 40% discount to the sum-of-theparts valuation to encompass a the stock’s holding company discount and risk premium to reflect related-party transactions.
As for UOBKH Research, it has a RM6.92 target price for Genting, and RM4 for Genting Malaysia.
Besides Genting Malaysia’s bid for a downstate New York gaming concession, UOBKH Research said there were several other catalysts for the Genting Group.
Other events worth monitoring are Genting’s investee Taurx Pharmaceutical’s clinical trial progress update and the focus on capital management over at Genting Singapore’s following its withdrawal from Japan’s integrated resort bids.
As for Genting Malaysia, a potential catalyst could be from its surprise bid for a Macau gaming concession.
The group also stands to be a beneficiary of China’s eventual border reopening.
“While Singapore and Malaysia have both seen impressive recovery of international patronage after borders reopening, we retain our view that China’s loosening of border restrictions remains the missing piece that serves as a strong re-rating catalyst for both the countries’ gaming industries.
To recap, Chinese visitors made up 19-20% and 11-12% of Singapore and Malaysia’s pre-pandemic tourist arrivals in 2018-19,” UOBKH Research said.
The research firm expects China to ease travel restrictions from 1Q23 onwards, and the pent-up demand for travel may allow RWG and RWS to potentially deliver above pre-pandemic gross gaming revenue.
Shares of Genting closed at RM4.56 on Friday, while Genting Malaysia finished at RM2.74.
“We expect another solid quarter in 4Q22 given the year-end seasonality.” Kenanga Research