Brokers’ take: CGS-CIMB raises target on Genting Singapore, expects higher earnings after positive MBS results

CGS-CIMB has raised its target price on Genting Singapore to S$1.26 from S$1.15 previously, as it believes the gaming counter is set to experience a similar growth trend to that of Marina Bay Sands (MBS), which posted a strong set of results for Q1 FY2023.

The revised target price continues to be pegged to a 10 times FY2024 enterprise value-to-Ebitda (earnings before interest, taxes, depreciation and amortisation) forecast, based on the stock’s five-year historical mean.

CGS-CIMB maintained its “add” call on Genting Singapore.

In a research report on Thursday (Apr 20), analyst Tay Wee Kuang projected that Genting’s adjusted Ebitda would reach S$237 million in Q1 FY2023. This is 27 per cent of the brokerage’s FY2023 forecast, or 25 per cent of the consensus forecast for the year.

The brokerage also increased its forecasts for adjusted Ebitda for FY2023, FY2024 and FY2025 by 2.7 per cent, 9.8 per cent and 8.8 per cent, respectively.

The higher projections are based on expectations that the group’s profitability will continue to improve throughout the year, as flight capacities to and from China gradually increase with the country’s reopening.

Following the stronger recovery of Asean tourism, Tay said Genting Singapore could see its non-gaming revenues improve faster, due to the demographic of visitors to its attractions.

He added that the reopening of Festive Hotel in May 2023, the ongoing construction of Minion Land and the Singapore Oceanarium – which will be completed between 2024 and 2025 – will “refresh” the integrated-resort operator’s non-gaming offerings to tourists.

CGS-CIMB, however, removed Genting Singapore from its “high conviction” list, highlighting the recent share price outperformance. The outperformance translates to a less attractive dividend yield of about 3 per cent for FY2023, said Tay.

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This sentiment was also echoed by DBS Group Research in a separate note on Thursday: “Genting Singapore’s Q1 FY2023 performance could be better than anticipated, but we still believe upside could be limited given its recent share price outperformance.”

But the research house noted that MBS’ robust Q1 results suggests Genting Singapore may also top the street’s expectations.

DBS maintained its “hold” call on the stock, with an unchanged target price of S$1.05.

Shares of Genting Singapore rose 1.8 per cent or S$0.02 to close at S$1.16 on Friday.