Brokers’ take: Maybank says Genting Singapore recovery remains ‘intact’, lowers target

MAYBANK has trimmed its target price on Genting Singapore to S$1.12 from S$1.18, after cutting its core net profit forecasts for the integrated resort operator.

Despite the target price drop, the research team believes recovery for Genting is “intact”, as the group is on track to recover to pre-Covid levels in FY2024. It has maintained its “buy” call on the counter.

The new target price implies a potential upside of 20 per cent from the counter’s last trading price of S$0.93 as at 2.50 pm on Tuesday (Jul 4). Its shares were down 1.6 per cent or S$0.015 at the time.

In a Monday report, Maybank trimmed its core net profit forecasts for FY2023 by 12 per cent, FY2024 by 6 per cent and FY2025 by 9 per cent.

Forecasts for earnings before interest, taxes, depreciation and amortisation (Ebitda) were also reduced for FY2023 by 14 per cent, FY2024 by 9 per cent and FY2025 by 8 per cent.

The revised Ebitda forecasts came as Genting hired 800 more staff to bring its total staff count to around 8,000 by the end of FY2023. Maybank also expects the group to incur more marketing expenses to attract more Chinese tourists.

Notwithstanding the lower Ebitda forecasts, the research team expects Genting to return to FY2019 levels by FY2024.

“This is more meaningful when we consider that gaming tax rates will effectively be five percentage points higher by then,” said analyst Yin Shao Yang.

Yin noted that operations have been improving steadily, with all major operating metrics, such as VIP volume and mass tables gross gaming revenue (GGR), trending higher quarter on quarter.

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Singaporeans have also been driving the growth of high-margin slot machine GGR. Non-gaming revenue, which dipped 15 per cent in the first quarter of 2023 as Singaporeans travelled abroad during the school holidays, is also recovering.

With Chinese visitor arrivals for the first five months of FY2023 coming in at only 20 per cent capacity of pre-Covid levels, there is room for improvement for operating metrics as seat capacity from China recovers, Maybank said.