Hot stock: Genting Singapore falls 9.7% on Friday after Q4 results disappoint

SHARES of Genting Singapore fell as much as 10.2 per cent on Friday (Feb 23), after the operator of Resorts World Sentosa reported disappointing fourth-quarter financials the day before.

The counter fell as much as S$0.105 to S$0.925 during the trading session, before eventually closing at S$0.93, down S$0.10 or 9.7 per cent. It was the lowest closing price since Dec 6, 2023.

Some 143.6 million shares worth S$136.1 million changed hands during the day, making the counter the third most active in terms of value traded on the exchange.

Despite higher profit for H2, its core net profit of S$127.1 million for the fourth quarter was 5 per cent lower year on year, and 41 per cent lower on the quarter, missing street estimates.

The sharp fall of earnings compared with the previous quarter far exceeded the seasonal 6 per cent quarter-on-quarter revenue drop as a high number of Singaporeans travelled overseas during year-end holidays, Nomura pointed out.

One-off items, such as a much higher provision on trade receivable balance, dragged down the quarter’s earnings, on top of impairments.

Maybank Securities highlighted that a 34 per cent quarterly drop in earnings before interest, taxes, depreciation and amortisation (Ebitda), despite a higher VIP win rate, was led by a combination of higher impairment of trade receivables, penalties and write-offs relating to a major hotel brand and marketing expenses to attract more international visitors.

It trimmed its target price to S$1.16 from S$1.21 upon lowering its Ebitda estimate for FY2024 down 6 per cent, and net profit estimate down 11 to 12 per cent to reflect higher impairment of trade receivables, as well depreciation and amortisation.

Citi Research noted that the S$92 million bad debt provision in H2 came as a “negative surprise”.

“Although management remains committed to staying conservative on its credit extension policy, we conservatively model its FY2024 bad debt provision to at least amount to S$120 million in a base-case scenario,” said Citi.

It lowered its target for Genting Singapore to S$1.16 from S$1.20.

However, analysts remain bullish on the company’s outlook with maintained “buy” calls, given the Singapore-China visa waiver and an event-led tourism boom.

“Investors should, therefore, expect a more normalised Ebitda margin to be closer to 45 per cent levels, and not extrapolate 2024 Q4’s print,” said Nomura, which recommended investors to accumulate more shares of the resort operator on any knee-jerk selling on Friday.

Nomura raised its target for Genting Singapore to S$1.30 from S$1.26, upon lifting its revenue and Ebitda estimates for FY2024 by 7 per cent and 6 per cent, respectively.