Integrated resort developer, and one of just two casino operators in Singapore, Genting Singapore Limited (SGX: G13) recently reported a strong set of earnings for FY2022.
Listed as one of our top Singapore buys for this month, Genting Singapore’s net profit jumped by 85% year-on-year (yoy) to S$340.1 million in FY2022.
The strong performance was in line with the 62% yoy increase in its revenue to S$1.7 billion.
The financial results have lived up to the market’s expectations and so, here are five key takeaways for investors who might be looking to invest in Genting Singapore.
1. Return to travel boosts earnings recovery
The earnings recovery was fuelled by the return to travel as most countries reopened their international borders.
This helped to drive growth for both the gaming and non-gaming revenue.
Gaming revenue was up 53% yoy and surpassed the S$1 billion mark, as the company raked in S$1.2 billion, while non-gaming revenue surged by 90% to S$490.8 million.
2. Strong balance sheet and positive cash flow
Aside from the earnings recovery, Genting Singapore also has a strong balance sheet with a cash position of S$3.5 billion.
This dwarfs the Group’s debt level of around S$5.5 million and puts Genting Singapore in a strong position a mid the rising interest rate environment.
The cashflow of Genting Singapore has also improved significantly as compared to a year ago.
In FY2022, the Group had a net operating cash flow of S$806.7 million as compared to a net operating cash flow of S$377.7 million in the year-ago period.
3. Dividend doubles in FY2022
Genting Singapore declared a final dividend of 2.0 Singapore cents per share, which is double that of the final dividend announced in FY2020 and FY2021.
Together with the 1.0 Singapore cent per share interim dividend declared in H1 FY2022, Genting Singapore’s full-year dividend for FY2022 is 3.0 Singapore cents per share, which translates to a dividend yield of around 3%.
4. Expansion plans remain intact
According to Genting Singapore’s notes, the expansion projects (RWS 2.0) have commenced and this includes the ongoing construction of the Singapore Oceanarium (SGO), Minion Land at Universal Studios Singapore, and supporting infrastructure facilities to cater to the overall expansion of RWS.
Genting Singapore will also introduce “Van Gogh: The Immersive Experience, a 360° multi-sensorial exhibition”, which combines the art and virtual reality (VR) to make its first debut in the Southeast Asia region at its refurbished theatre space in March 2023.
A newly-renovated Festive Hotel will be re-launched in May 2023 as a lifestyle destination hotel, adding 389 rooms to the resort’s overall hotel inventory.
Slated for completion in late 2024, the Forum and Coliseum, with more than 20,000 sqm of commercial space, will undergo a major transformation.
It will serve as a central lifestyle cluster in the resort, offering a wide variety of entertainment, retail, and dining options in a lush biophilic environment.
5. Key beneficiary of China’s reopening
China reopened its international borders at the beginning of this year after about three years of lockdowns.
This will boost Genting Singapore’s earnings going forward.
Currently, the strong FY2022 has not taken into consideration the return of Chinese tourists, which made up of 19-20% of Singapore’s tourist arrivals prior to the pandemic.
The pent-up demand and strong luxury retail spending of Chinese tourists could drive earnings growth for Genting Singapore.
The full benefits from the return of Chinese tourists are likely to be reflected during the second half of this year due to the limitation in flight capacity and ticket fares at the moment.
It is, however, worth noting that Singapore was among the top destinations for the China market following the reopening of its international borders in January.
Recovery will gain further momentum with its expansion and return of Chinese tourists
Longer term, investors will find that Genting Singapore is trading at a bargain given its expansion plans in the pipeline.
Earnings have recovered strongly in FY2022, even before taking into account the return of Chinese tourists.
Its strong balance sheet will also allow Genting Singapore to continue to pursue its expansion plans and the return of Chinese tourists will drive earnings growth in the near term.
Given its potential for growth and a dividend yield ranging from 3-4%, it’s certainly preferable to buy Genting Singapore stock rather than gambling against the House at its casino.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
