Genting Singapore’s 2Q22 results compelled leading brokerage Nomura to revise the target share price to SGD0.97, despite the operator’s manpower shortage as one middle-term hurdle and higher gaming tax clubbed with lower VIP win revenues.
Genting Singapore reported second-quarter numbers for the period ended on Jun 30, of which total revenue of the company grew 26 percent on a YoY basis and 11 percent on a QoQ basis at $349 million.
Net profit of was down 18 percent on a YoY basis and up 9 percent on a QoQ basis at $44 million, which prompted Nomura to revise the target price of the company, despite the company sees manpower shortage as one middle-term hurdle and higher gaming tax clubbed with lower VIP win revenues.
The rise in the revenues for the second quarter was mainly drive by the international visitors due to progressive reopening of the borders and pent-up demand, the brokerage report read.
Manpower shortage, which is seen as a near-term hurdle, may not make a long-term impact on the earnings of the company, the brokerage reflects its views.
According to management, the Resorts World Sentosa is currently running at limited capacity and is not able to meet the current demand fully, as the company is facing difficulties in hiring manpower for business operations.
“The company has been making efforts to hire aggressively in the past few months and aims to hire 1,600 new employees by end-2022,” the report read.
One of the issues discussed at length during the earnings call was a manpower shortage.
As per management, the resort is currently running at limited capacity and is not able to meet the current demand fully, as the company is facing difficulties in hiring manpower for business operations.
Note that for the gaming business, new hires need to be licensed by the regulator as well.
Management also expects a slight weakness in EBITDA margins of 1-2pp in 2H due to higher wages.
Border reopening is likely to increase in scope, because the brokerage report views 2H22F earnings to be better than 1H22, due to the normalization of VIP win, and continued ramp-up in tourism.
Nomura reiterates its positive stance on GENS to play the trend of gradual border reopening for Singapore to overseas visitors.
Though the return of Chinese visitors will likely take some time, with China still pursuing a zero-COVID strategy; this will likely continue to impact GENS’s FY22F revenue as China was its most important overseas market before the pandemic.
Expensive airfare and lower number of flights vs pre-pandemic levels are affecting visitation to Singapore and consequently to the resort, as per management.
However, with the addition of flight capacity, this problem is likely to ease, the brokerage report highlighted.