Last Updated on 4 September 2023 by Nicholas Lim
Analysts Herald Genting Singapore’s Resilient H1 Performance Amid Pandemic Aftermath
Genting Singapore Ltd, a venerated casino operator in the Lion City, recently published its biannual financial statements, evoking a collective sigh of relief among market watchers. A duo of brokerage firms remarked that the company’s H1 performance was more robust than initially apprehended, especially given the lackluster Q1 metrics.
In a disparate but corroborative tone, a third brokerage noted that although inbound travel from mainland China remains anemic relative to pre-Covid norms, Genting’s Resorts World Sentosa (RWS) has successfully cultivated a patronage base hailing from adjacent nations.
Eclipsing prior annual comparisons, Genting Singapore saw a stratospheric 227.7% ascent in its net profit, reaching SGD276.7 million (US$205.6 million), as per the Thursday disclosure.
Market analyst Samuel Yin Shao Yang of Maybank Research Pte Ltd opined on Friday, “RWS demonstrated a multi-dimensional rebound in key operational metrics—VIP volumes and ancillary income streams, for instance—not solely buttressed by renewed Chinese visitations but also buttressed by a resurgence of Southeast Asian clientele, predominantly from Malaysia and Indonesia.”
Maybank further extrapolated, “Compared to the integrated resorts in Macau, RWS’s defensible position vis-à-vis a potential contraction in the Chinese economy appears more sanguine.”
Pitted against its solitary competitor, Marina Bay Sands—under the aegis of the U.S.-based Las Vegas Sands Corp—Resorts World Sentosa constitutes one facet of Singapore’s duopolistic casino landscape.
Analysts Tushar Mohata and Alpa Aggarwal from Nomura weighed in, stating, “Genting Singapore’s Q2 yield outstripped anticipations, in part, owing to an elevated VIP win rate that exceeded theoretical projections.”
Additionally, JP Morgan elucidated that an influx of SGD55 million in Genting Singapore’s coffers could be attributed to favorable “luck” factors that tilted the house’s favor during Q2.
“Prospects for an augmenting H2 performance are propitious, catalyzed by the Northern Hemisphere’s summertime leisure travel, burgeoning air travel infrastructure, and an enhanced lodging capacity ensuing from the June 2023 revamp of the Festive Hotel,” JP Morgan highlighted.
Without discounting the possibility of a global economic slump, Maybank projects an even brighter H2 for Genting Singapore, buttressed particularly by an uptick in Chinese tourists. “The July 2023 airlift capacity from the Middle Kingdom to the Lion City approximated 74% of its pre-pandemic zenith,” observed analyst Mr. Yin.
However, JP Morgan accentuated potential headwinds for Resorts World Sentosa in the form of eroding market share vis-à-vis Marina Bay Sands, particularly in the mass-market gaming segment.
JP Morgan detailed, “Genting Singapore’s market share in mass table and slot operations ebbed to an unprecedented 30% in Q2, from roughly 37% in the pre-pandemic year of 2019. While initiatives like the refurbishment of rooms and the imminent launch of ‘The Forum,’ an upscale retail and dining complex, are underway, skepticism persists.”
On a more sanguine note, JP Morgan catalogued the upsurge in Genting Singapore’s interim dividend, from SGD0.010 per share last year to SGD0.015 this year, as a “seminal positive.” This, they opined, sets the stage for a return to pre-Covid dividend levels by 2024, potentially reverting to the SGD0.40 annual dividend disbursed in 2019.
Marina Bay Sands Foresees Soaring Expansion Costs Amid Market Flux
Las Vegas Sands Corp, the parent company of Singapore’s Marina Bay Sands (MBS), has indicated that the price tag for its previously planned expansion will surpass initial estimates. The revised forecast stems from a gamut of variables including inflation and rising labor and material costs.
The original commitment, made in April 2019 between Marina Bay Sands Pte Ltd and Singapore Tourism Board (STB), included a SGD4.5 billion (around US$3.32 billion) spending outline for enlargement endeavors. This was in sync with Singapore’s decision to maintain its existing casino duopoly—comprising also Genting Singapore Ltd’s Resorts World Sentosa—through to 2030. Both enterprises pledged an identical SGD4.5 billion investment for amplification activities.
However, Las Vegas Sands Corp has intimated, in its recent semi-annual dossier, that due to prevailing market vicissitudes such as inflation and surging costs for resources and manpower, the originally earmarked funds will no longer suffice.
The pandemic’s three-year span has engendered a cascade of delays and operational revisions for this enterprise. A subsequent accord with the STB in March this year pushed the construction commencement date to April 8, 2024, and the finalization timeline to April 8, 2028. This supplemental agreement permitted alterations in both the edification and functional blueprints.
“Upon completing the design phase and inaugurating construction, we will furnish updated estimates for both the budget and timeline,” Las Vegas Sands Corp elucidated in its filing.
As of the close of June, the company has already expended roughly US$1.07 billion on this initiative. This amount includes payment for the land lease vital to the expansion project.
The original 2019 blueprint revealed plans for a sumptuous new hotel tower boasting luxury suites and rooms. Additionally, the plan entails a rooftop leisure zone, ultramodern conference spaces, and a cutting-edge entertainment arena with a seating capacity for 15,000 spectators.
“We are diligently finalizing the designs while recalibrating both the financial and temporal elements due to manifold considerations,” the company added. Consequently, initial projections related to the construction cost and schedule have been deferred, failing to meet the extended March 31, 2022 deadline for lender delivery.
As a fallout of these delays, the corporation acknowledged that no further financial drawdowns from its Singaporean facility would occur until the pertinent information is formally presented to its lenders. “No significant expenditures relating to the Marina Bay Sands expansion are anticipated prior to this formalization,” the company affirmed.
Moreover, the report took the occasion to underscore an ongoing US$1 billion refurbishment of its existing Marina Bay Sands hotel rooms, aiming to elevate guest experience for premium patrons. “This refurbishment runs parallel to the expansion efforts and aims for completion by the year-end of 2023,” the casino conglomerate concluded.