GGRAsia – High 1Q hold at GEN Sing, costs still issue: analysts

High 1Q hold at GEN Sing, costs still issue: analysts

May 13, 2024 Newsdesk Latest News, Singapore, Top of the deck

“Extremely high” hold in the VIP gambling segment at Resorts World Sentosa (pictured) helped Genting Singapore Ltd’s business performance in the first quarter, but the issue of player bad debt and other business costs still lurk in the background for the current year, say several brokerages.

Genting Singapore – operator of one half of Singapore’s casino duopoly – saw quarterly net profit circa double quarter-on-quarter and year-on-year when it reported first-quarter trading highlights in a Friday after-hours filing to the Singapore Exchange.

Banking group JP Morgan stated in a Saturday memo: “Headline EBITDA [earnings before interest, taxation, depreciation and amortisation] came in extremely strong (45 percent-plus beat versus consensus), boosted by extremely high VIP luck, which was extremely unexpected.”

The institution added: “Genting Singapore only discloses full details behind bad debt on a semi-annual basis. But on our estimates, its bad debt stayed elevated versus pre-Covid levels in the first quarter, although lower than the last quarter’s very high levels.”

Banking group Nomura said in its assessment on the first-quarter highlights of Genting Singapore: “Adjusted EBITDA margin was higher at 47 percent versus 35 percent in fourth-quarter 2023.”

Analysts Tushar Mohata and Alpa Aggarwal further noted: “This was mainly led by expected seasonal strength, as the first quarter [was] seasonally strong due to Lunar New Year holidays, an above-normal VIP win rate, as well as popular concerts which helped visitation to the country.”

Genting Singapore had commented in April – following queries from investors – on the impact for casino resort business there of large-scale entertainment events in the city-state. Mentioning recent large-scale concerts in Singapore – by respectively the international acts Coldplay, Taylor Swift, and Bruno Mars – Genting Singapore had stated: “Large-scale concerts featuring internationally-renowned artists amplify Singapore’s global brand and international stature as a vibrant tourism destination.”

China tourism boost

Maybank Investment Bank Bhd offered in a Sunday note its take on Genting Singapore’s first-quarter highlights.

Analyst Samuel Yin Shao Yang stated: “As we have posited for more than a year now, Genting Singapore benefitted from the en-masse return of Chinese visitors.”

He added: “Adjusted for normal VIP win rate, we expect second-quarter 2024 to be seasonally slower, but third-quarter and fourth-quarter 2024 to be seasonally stronger.”

Though Mr Yin also observed: “We trim our earnings estimates by 7 precent to 8 percent on higher expenses.”

These encompassed “higher staff costs and slightly higher [player] reinvestment rates: direct VIP rebates and promotional allowances,” stated the Maybank analyst.

Maybank now thinks Genting Singapore’s 2024 core net profit will be SGD718.9 million (US$530.8 million), rather than SGD775.4 million, i.e., a reduction of 7.3 percent.

The calculation assumes 2024 staff costs rising to SGD560.1 million, to be 12.8 percent more than its previous estimate for the year. Maybank thinks Genting Singapore’s 2024 player reinvestment rate – as a percentage of gross gaming revenue – will be 10 basis points higher than its prior calculation, at 2.2 percent.

In other news coinciding with Friday’s first-quarter highlights, Genting Singapore gave some additional information on the Sentosa Precinct Partnership in which it will be a participant alongside Sentosa Development Corp, DBS Bank, and the Singapore Tourism Board.

Sentosa – a separate island but linked to the main Singapore island by bridge – is a long-standing tourism destination within the city state.

A Friday press release on the partnership stated it followed a “soft opening” of the Sentosa Sensoryscape.

“This 350-metre-long [1,148-feet] connector, featuring six innovative sensory gardens and an immersive night experience, is directly linked” to Resorts World Sentosa.

Tan Hee Teck, chief executive at Resorts World Sentosa, was cited as saying in the press release: “At the heart of our partnership with the Singapore Tourism Board, Sentosa Development Corporation and DBS is a shared vision to draw global visitors from diverse and affluent segments to the island, as well as increasing tourist spend.”