Genting Singapore: On track to deliver a stronger 2H25
- 1Q25 adj. EBITDA at SGD236mn (-36% y/y), below our and consensus estimates
- New hotel rooms, retail spaces, and Oceanarium on track to open in early 3Q, which would support a s
- Cut FY25F adj. EBITDA by 6% on softer non-gaming revenue with slowdown in tourist arrivals
- TP reduced to SGD0.90 on lower FY25F EBITDA and consequently lower near-term FCF generation
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1Q25 results below our estimates and consensus. Genting Singapore (GENS) reported adjusted EBITDA of SGD236mn, down 36% y/y. This accounted for only 22% of our FY25F figure, falling short of expectations and below the pre-COVID 1Q contribution range of 25%-29%. The figure also came in 3.6% below consensus estimates of SGD245mn. The shortfall was primarily due to softer-than-expected non-gaming revenue, with room occupancy declining q/q to 72%, despite 1Q typically being a stronger quarter. This was largely attributed to weaker tourist arrivals into Singapore, likely due to broader macroeconomic softness in the region.
1Q25 revenue fell 24% y/y to SGD438mn on weaker VIP volumes, normalised win rate, and lower non-gaming contribution. VIP rolling volumes dropped 19% y/y, reflecting the company’s strategic decision to limit exposure amidst regional economic uncertainties. In addition, the VIP win rate normalised to 3.4% (vs. 4.6% in 1Q24), which further weighed on gaming revenue. Ongoing renovation works at Hard Rock Hotel, which commenced in April last year, also negatively impacted performance on a y/y basis.
Opening of new hotel rooms, retail spaces, and Oceanarium on track for early 3Q25, to deliver a stronger 2H25. The Laurus, a 183-room luxury suite hotel under Marriott’s luxury collection, remains on schedule for a soft launch in Jul for members and a full public opening in Oct. Revamped retail spaces, now branded as The Weave, will feature exciting new-to-market concept stores designed to rival the retail experience at Marina Bay Sands. These, along with the Oceanarium, are slated to open in early 3Q25, aligning with the seasonal tourism peak. While we anticipate a softer 2Q25 due to higher promotional costs ahead of these launches, we expect EBITDA margins to improve sequentially in 2H25 with increased visitor flow to the new attractions and hotel.
Search is on for a new CEO. CEO Mr Tan Hee Teck has announced his retirement from all executive and board roles effective 31 May 2025. He will stay on in an advisory capacity until 30 November 2025 to ensure a smooth transition. Citing his upcoming 70th birthday, Mr Tan expressed a desire to focus on personal pursuits and societal contributions after years of leadership. In the interim, Executive Chairman Mr Tan Sri Lim will serve as Acting CEO from 1 June 2025 while maintaining his current role. At the same time, Ms Lee Shi Ruh, current CFO of GENS, will be appointed CEO of Resorts World Sentosa (RWS) and will concurrently retain her responsibilities as Group CFO.
Key Takeaways from NDR
New CEO to be an outsider with relevant experience. Management indicated that the search for a new Group CEO and RWS CEO is actively underway, with a preference for external candidates possessing relevant industry experience. It emphasised that no family members of the founding family are involved at the management, board, or employee level. Nonetheless, operations are expected to remain largely unchanged under the new leadership.
Not keen on expansion into Thailand given proposed regulatory framework. Management expressed limited interest in expanding into Thailand, which we believe is attributable to the restrictive regulatory conditions – specifically the proposed THB5k (~SGD200) entry fee and requirement for a bank account with a minimum balance of THB50mn (~SGD2mn), as per the casino bill approved by the cabinet. These thresholds would limit the addressable customer base to predominantly foreigners, rendering the overall economics less attractive.
Focus remains on fundamentals over share buybacks.
Rather than deploying its strong cash reserves for share repurchases, management reiterated its preference to focus on improving the underlying business as the primary lever for share price appreciation. It noted that previous share buyback exercises had little impact on stock performance.
Islandwide hospitality softness could prompt room rate adjustments. Management acknowledged a broader slowdown in tourist arrivals and hotel occupancy across the Singapore market. As such, it is evaluating potential room rate cuts to support occupancy levels. Reflecting this, we have lowered our assumptions for both occupancy and room rates. This led to an 18% reduction in our non-gaming revenue forecasts, though still up 2.4% y/y on expected 2H25 recovery. Consequently, we trimmed adj. EBITDA by 7%, now reflecting a 2.9% y/y increase. We remain confident that a stronger 2H25 will offset 1H softness.
Absolute dividend growth policy remains intact. Management reaffirmed its commitment to maintaining at least the baseline dividend, even in a declining earnings scenario. Following our earnings revisions, we have adjusted our FY25F DPS forecast to 4Scts per share, in line with FY24 levels given flattish earnings y/y.
Maintain BUY with lower TP of SGD0.90 (vs. SGD0.95 previously). Our TP of SGD0.90 is based on a blended valuation framework of (i) forward EV/EBITDA of 6.5x on lower FY25F estimates, and (ii) DCF, assuming 8.5% WACC and 3% risk-free rate.
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