Excerpts from CGS International report

Genting Singapore (SGX: G13)

• Genting Singapore 1Q24 adj. EBITDA reached S$369.5m, exceeding expectations at 32.2% of both our and Bloomberg consensus FY24F estimates.
• A strong adj. EBITDA margin of 47.1% in 1Q24 (+7.5% pts yoy/+12.0% pts qoq) suggests a confluence of better win rates and collections, in our view.

Reiterate Add and TP of S$1.30. We believe its current valuation at more than 1 s.d. below 5-year mean of 9.2x 12M fwd EV/EBITDA is attractive.

Strong seasonality and potential one-offs in 1Q24

Genting Singapore’s 1Q24 adjusted EBITDA of S$369.5m (+92.7% yoy) was driven by strong revenue growth of both its gaming (+69.5% yoy) and non-gaming segments (+44.2% yoy) due to increased visitorship and tourism spending. However, we believe the strong adj. EBITDA margin expansion of 12.0% pts qoq despite the relatively flat non-gaming revenue on a quarterly basis (+1.0% qoq) against the increase in its gaming revenue (+30.6% qoq) suggests Genting Singapore benefitted from either a stronger win-rate, better bad debt collections, or both, in 1Q24 against 4Q23.

Travel recovery to likely to play out by 2Q24F

With YTD IVAs recovering to 92.9% of 2019 levels, we think that further recovery in IVAs will be limited in light of latest data from Singapore Tourism Board that indicated Apr 24 IVAs only reached 84.9% of Apr 19 levels. Nevertheless, IVAs is likely to experience robust yoy growth of c.20% in 2Q24F; a Straits Times article published on 6 May 24 reported that tour operators saw an increase in Chinese tourist arrivals for the Labour Day “Golden Week” from 1 May to 5 May, which we believe will support IVA numbers. We think that this will help to partially offset GENS’s weak non-gaming segment, which has been hampered by ongoing renovation works in Hard Rock Hotel, in turn reducing its key inventory by c.25%, as well as in the Forum, likely dampening leasing activities for F&B outlets.

Valuation/Recommendation

Maintain Add as attractive valuation as profitability normalises. Our TP, pegged to its 5-year historical mean EV/EBITDA of 9.2x, stays at S$1.30 despite increases to our FY24-26F adj. EBITDA by 2.2-5.7% due to a slight decline in the valuation multiple to 9.2x from 9.4x previously as a result of the recent de-rating of the stock. Genting Singapore is currently trading at an attractive 5.6x forward EV/EBITDA, more than 1 s.d. below its 5-year historical mean. We also reduce our lower non-gaming revenue estimate for FY24F given renovation in Hard Rock Hotel and the Forum, which management expects to complete by end-FY24F. We think Genting Singapore’s non-gaming revenue from FY25F will be supported by the launch of new attractions, such as Minion Land, the Singapore Oceanarium and the Asia premiere of Harry Potter. Visions of Magic as well as amenities like the revamped Hard Rock Hotel and the Central Lifestyle Connector (i.e. revamped Forum). Re-rating catalysts: stronger non-gaming revenue growth and sustained higher adj. EBITDA margins from cost control. Downside risks: higher bad debt recognition and delayed completion of construction works. Genting Singapore share price chart You can find the full report here and the company website here.