Singapore casino complex Resorts World Sentosa (RWS) is likely to see sequential improvement in quarterly earnings before interest, taxation, depreciation, and amortisation (EBITDA) for the three months to March 31, says Morgan Stanley Asia Ltd.
It expects the property (pictured), promoted by Genting Singapore Ltd, to have generated SGD301 million (US$220.7 million) in EBITDA for the first quarter. That would be up circa 25 percent sequentially, and about 53 percent year-on-year. Such result would represent about 89 percent of the pre-pandemic level seen in first-quarter 2019, and “9 percent higher than sell side consensus provided by Visible Alpha,” stated analysts Praveen Choudhary and Gareth Leung.
The analysts said they thought Genting Singapore’s year-on-year growth in net revenue would slow in 2024 to circa 5 percent, from 41 percent in the initial pandemic-recovery year of 2023.
While Genting Singapore’s gaming volumes had already recovered “to or slightly above 2019 level in fourth-quarter 2023,” gaming volume for 2024 “could be limited by 400 fewer hotel rooms after Hard Rock closure,” stated Morgan Stanley.
That was a reference to the March 2 shuttering of that hotel brand at Resorts World Sentosa, as the complex proceeds with planned expansion.
The complex’s 2024 gaming growth “could come from the mass segment and market share improvements,” suggested Morgan Stanley.
The brokerage’s memo said it had recently hosted Genting Singapore management and investors at a meeting in Singapore.
Factors in the likely sequential gain in EBITDA for the first quarter were a “low base in fourth-quarter 2023 which was impacted by approximately SGD40 million one-off charges”; “improved” Chinese visitor volume; “and collection of some of the high provisions made in fourth quarter 2023” in relation to receivables.
Recent data from Singapore Tourism Board showed visitor volume to the city-state in the first three months of this year recovered to 92.8 percent of pre-pandemic first-quarter 2019. Chinese visitor volume lagged the overall trend, at 81.8 percent of first-quarter 2019.
In a voluntary filing last week, Genting Singapore did not directly address a shareholder question seeking comment on a recent warning by the Chinese Embassy in Singapore for Chinese citizens to stay away from gambling, and whether this “could this have a negative impact on the company’s operational performance going forward”.
Genting Singapore shares a casino duopoly in Singapore with Las Vegas Sands Corp, which runs the Marina Bay Sands resort.
Morgan Stanley said that as of end-2023, Genting Singapore’s allowance for trade receivables had increased to SGD202 million, with the charge for impairment amounting to SGD124 million for 2023.
“As a percentage to trailing-12-months EBITDA, impairment on trade receivables increased to 19.6 percent in second-half 2023, from 7.8 percent in first-half 2023, and 9.0 percent in 2019,” observed the brokerage.
The institution anticipated Genting Singapore’s dividend payout for 2024 would be circa 70 percent, “similar to 2023 and 2019”.
Its analysts added: “We forecast dividend per share to increase 14 percent year-on-year in 2024 to SGD0.04/4.5 percent yield, back to 2019 level.”
Genting Singapore proposed a one-tier, tax-exempt final dividend for 2023 of SGD0.02 per ordinary share, amounting to SGD241.4 million. The dividend will be paid on May 24, to shareholders on record as of May 3, according to a Wednesday filing.
Citing Genting Singapore management commentary on the possible legalisation of casino business in Thailand, Morgan Stanley observed: “Genting Singapore remains opportunistic on Thailand but it is too early to discuss financial or competitive impact on the company.
“Thailand casino [business] should be additive, similar to the Philippines, rather than disruptive to Singapore casino business,” said Morgan Stanley, citing Genting Singapore’s viewpoint.
