• Genting Singapore’s 1Q22 earnings missed our and Street’s expectations mainly due to higher-than-expected costs, while revenue was in line. We believe subsequent quarters will continue to improve on Singapore’s border reopening.
• We trimmed FY22F earnings forecast for Genting Singapore by 8% to factor in higher costs. We continue to like Genting Singapore for its strong recovery in FY22 and 4% FY23 yield.
• Keep BUY rating on Genting Singapore with S$0.95 target price, 23% upside, ~3% FY22 yield.

Genting Singapore - 1Q22 Results Highlights

• Genting Singapore (SGX:G13)'s 1Q22 missed both our and Street’s expectations. 1Q22 adjusted EBITDA made up 19% of our estimates and 18% of Street’s, while core net profit made up 13% and 12% respectively. The deviation was mainly due to lower-than-expected margins, as revenue met our expectations at 21% of our full-year estimate. No dividends were declared, as expected.
• Despite the Omicron variant’s spread in 1Q22, gaming revenue improved 8% y-o-y and 42% q-o-q, while non-gaming revenue (NGR) rose 26% y-o-y. NGR softened 16% q-o-q against a seasonally stronger 4Q, where the holiday season tends to draw more visitors to Genting Singapore’s non-gaming attractions.
• Adjusted EBITDA dipped 2.5% y-o-y on higher utility expenses and the expiry of COVID-19-related government grants. Adjusted EBITDA jumped 80% q-o-q mainly on gaming revenue recovery, which lifted adjusted EBITDA margin by 13ppts q-o-q to 40%.

Genting Singapore - Outlook

• While management has pointed out that “limited flight schedules” and “ongoing travel restrictions on visitors from certain countries” may moderate the pace of recovery in leisure travel, we believe that these limitations and restrictions will continue to ease as the world transitions into endemicity.
• Moreover, Singapore’s reopening of borders to vaccinated travellers will continue to drive Genting Singapore’s recovery. Despite 1Q22’s softer margins, we believe its EBITDA margin will recover in tandem with its revenue, given its operating leverage.

Genting Singapore - Earnings and Forecasts

• Post results, we trimmed risks:
  • Re-closure of international borders, which would likely reduce footfall,
  • negative luck factor and regulatory risks, which could impact gaming revenues, and
  • China’s strict clampdown on illegal gambling and capital outflows having a dampening effect on Genting Singapore.

Source: RHB Invest Research - 20 May 2022