Genting Singapore Earnings: Recovery Continues; Improving Flight Capacity Drives Further Uptick

We maintain our fair value estimate of SGD 0.96 per share for Genting Singapore G13, following the company’s in line second-quarter results, with solid sales recovery across all gaming and nongaming segments, benefiting from the return of regional travel and gaming demand. With tourism traffic and airline capacity continuing to recover—particularly the gradually normalizing travel between China and Singapore—we expect Genting to accelerate its growth in the second half. We maintain our earnings forecasts and expect the company’s adjusted EBITDA to rise 29% year over year to SGD 997 million in 2023. We think the shares are currently fairly valued.

Second-quarter revenue rose 71% year over year, or 23% from a quarter ago, to SGD 596 million, representing 94% of 2019 level. Adjusted EBITDA of Resorts World Sentosa, or RWS, improved 79% year over year, or 37% sequentially, to SGD 256 million, tracking 88% of 2019′s level. The results indicate an accelerating growth compared with a quarter ago, boosted by the rebound in nongaming business and regional gaming demand, as well as a higher VIP win rate. However, the pace of recovery still lagged peer Marina Bay Sands, with revenue and adjusted EBITDA hitting 118% and 125% of 2019 levels, respectively. Compared with MBS, Genting has a higher portion of gaming revenue derived from VIP and premium segments, which means more reliance on Chinese visitors and that it is having a slower recovery due to flight capacity constraints in China, which was only about 50% of 2019 levels, according to management.

As China is pushing forward to resume air connectivity gradually and promote co-operation with international partners, we expect flight capacity to rise further to 70%-80% of 2019 levels in the second half of 2023. We think Genting is well-positioned to benefit from increased air capacity and tourism traffic to Singapore, particularly from China.