Brokers' take: Maybank lowers TP for Genting Singapore on stricter VTL conditions, foreign competition

GENTING Singapore G13 : G13 0% will likely post another year of flattish earnings amid a reduction in new land vaccinated travel lane (VTL) travellers between Singapore and Malaysia, as well as competition for premium mass gamblers from foreign peers, Maybank said.

In a research note on Monday (Jan 17), analyst Yin Shao Yang lowered the brokerage's target price for the integrated resorts operator to S$0.83 from S$0.86, after he cut core net profit estimates by 72 per cent in FY2022 and 54 per cent in FY2023.

Yin maintained his "hold" call on the counter, adding that "consensus earnings estimates are aggressive".

Shares of Genting Singapore closed flat at S$0.78 on Tuesday, with nearly 17.9 million shares traded.

The analyst noted that Malaysians contributed 20 to 30 per cent of Resorts World Sentosa's (RWS) VIP volume, and 30 to 40 per cent of its mass market gross gaming revenue pre-Covid-19.

With the sale of new VTL tickets suspended until Thursday (Jan 20), and a reduction in VTL quotas and ticket sales after Jan 20, Genting Singapore may be hit by having fewer Malaysian gamblers during the peak Chinese New Year period.

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Yin also noted that a quarter of the company's VIP market is likely "gone forever", with China having passed an amendment to a criminal code that outlaws the organisation or solicitation of cross-border gambling.

The analyst also expects half of RWS' mass market gross gaming revenue will be lost to integrated resorts in Macau, the Philippines and Cambodia, since the arrest of Macau's "junket king" Alvin Chau may push them to target the premium mass gamblers that frequently gamble in Singapore. (Chau's Suncity Group was the largest junket group in the world.)

Junkets are trips with complimentary services offered to casino VIP customers to promote gambling at the casino.

Although the integrated resorts may not be successful as VIPs that frequent Singapore have substantial ties to the Republic and use different money channels, they would still have to fill the large gap left by their former junkets-driven VIP market.

A higher gaming tax and goods and services tax in Singapore will also compress margins and moderate any earnings recovery the integrated resorts may experience, Yin said.

READ MORE:

• Brokers' take: Analysts positive on Genting Singapore's FY2022 recovery as tourism opens up

• Genting Singapore posts 11% rise in Q3 net profit on one-off gain, despite lower revenue