Although maintaining a ‘cautiously optimistic’ outlook for Genting Singapore in 2024, Maybank cuts its EBITDA and core net profit estimates by 6 percent and 11-12 percent, respectively.
Analyst Samuel Yin Shao Yang notes that the profit estimate cut was due to ‘higher impairment of trade receivables and depreciation & amortization.’
Genting Singapore announced its FY23 financial results on Thursday; the firm outperformed on a year-over-year basis. However, Maybank notes that the 4Q23 core net profit of SG$127.1 million ($94.6 million) decreased 5 percent from 4Q22 and 41 percent from 3Q23, which brought FY23 core net profit to SG$634.4 million ($472 million), staying lower than the brokerage’s previous expectation.
‘The shortfall in core net profit was due to FY23 depreciation and amortization coming in 21 percent above our expectation driven by accelerated depreciation as some attractions were discontinued to make way for the SG$6.8 billion ($5 billion) ‘RWS 2.0’ expansion plan.’
In an investment memo released following the earnings release, Maybank highlights the firm’s ‘kitchen sinking’ exercise that weighed on 4Q23 performance.
‘4Q23 EBITDA of SG$227.8 million ($169.5 million) was down 34 percent quarter-to-quarter although 4Q23 VIP win rate of 3.6 percent was c.40 basis points higher quarter-to-quarter largely due to 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.’
‘That said, 4Q23 non-gaming revenue seasonally eased 10 percent quarter-to-quarter following the peak summer holidays in 3Q23 and was within our expectations even though it negatively impacted EBITDA.’
The analyst is still optimistic about Genting Singapore for FY24, because ‘Genting Singapore does not expect the impairment of trade receivables to be as large going forward, and the aforementioned penalties and write-offs will not recur.’
At the same time, Chinese visitation increased since Singapore and China mutually waived visa requirements for each other’s citizens on 9th February 2024, which ought to reduce the need for marketing expenses.
