In the Singapore market, our research shows that 27% of the companies surpassed earnings expectations during H1 2023.
Dominant sectors such as finance, capital goods, transport, gaming, and healthcare posted impressive growth.
However, the tech sector experienced a dip, primarily attributed to the semiconductor sector’s deceleration.
Banks flourished, deriving profits from improved net interest margins (NIMs) and treasury income.
Meanwhile, Genting Singapore Limited (SGX: G13) reinforced its robust standing through escalating revenues from both the gaming and non-gaming segments.
Conversely, sectors, including commodities, tech, telcos, property, and REITs, witnessed downward adjustments in earnings forecasts, underscoring the stock market’s ever-changing landscape.
Looking ahead: key market trends for investors
1. Tourism’s silver lining:
Anticipated events, such as the F1 race, Singapore Air Show, and star-studded concerts featuring artists like Taylor Swift and Coldplay, paint a promising 6-9 month horizon for tourism-linked sectors.
While Genting Singapore is a clear frontrunner, stocks like CapitaLand Ascott Trust (SGX: HMN) and ComfortDelgro Corporation Limited (SGX: C52) also shimmer with potential.
2. Capital goods’ prospects:
Investors are leaning towards companies boasting solid order books and potential margin expansion.
Yangzijiang Shipbuilding (Holdings) Ltd (SGX: BS6), Singapore Technology Engineering Ltd (SGX: S63) and CSE Global Ltd (SGX: 544) emerge as preferred choices, riding on their H1 2023 performance.
3. The tech and REIT challenge
S-REITs may confront hurdles due to potential prolonged high-interest rates, even though their earnings showed resilience against rising borrowing costs.
Meanwhile, semiconductor-related stocks have struggled during the H1 2023 amid the slowdown in the semiconductor industry.
However, there is growing optimistic as they enter H2 2023, banking on a turnaround in the tech sector led by rising demand for Artificial Intelligence (AI) and the digitalisation trend.
UMS Holdings Limited (SGX: 558) and Frencken Group Limited (SGX: E28) stand out in the tech industry following their recent results.
Top Singapore pick for H2 2023
Genting Singapore has carved out a niche for itself as a top pick for H2 2023, riding on the tailwinds of an economy rejuvenated by tourism resurgence.
Here is an overview of the company’s performance and outlook:
1. Strong earnings recovery in Q2 2023
Genting Singapore’s Q2 2023 earnings show a strong momentum as adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) surged by 36% quarter-on-quarter (qoq) to S$260.7 million.
This captures 87% of the average of its FY2017 to FY2019 quarterly run rates prior to the COVID-19 pandemic.
This growth is fuelled by a 19.7% rise in gaming revenue and a 26.7% hike in non-gaming revenue, both nearing pre-pandemic figures.
2. Growth outshines its competition
Genting Singapore’s gaming revenue trajectory benefited from improved VIP win rates, harmonising with the non-gaming revenue uplifted by augmented tourist attractions.
This has helped Genting Singapore to report such impressive growth, which also outshines its peers.
Its 36% EBITDA growth significantly overshadows Marina Bay Sands’s 10%, allaying fears of market share erosion.
3. Flight capacities from key markets continued to recover
During an analysts’ briefing on 10 August 2023, management highlighted that the recovery of flight capacities from key markets – China and India – have reached around 60% of pre-COVID levels.
This points towards further recovery ahead as the tourism industry continued to gain momentum in H2 2023.
Prior to the pandemic, China and India were key markets for Genting Singapore.
4. Opening of refurbished hotel timely
With the refurbished Hotel Ora (formerly Festive Hotel) now open, a swell in non-gaming business seems inevitable.
This will cater for tourists that are coming into Singapore for some of the upcoming events.
5. Attractive valuation
Currently, Genting Singapore is priced at a forward enterprise value-to-EBITDA of 7 times, which is below its 5-year average.
Since April 2023, the stock has retreated by 24%, potentially reflecting concerns regarding Singapore’s allure as a tourist magnet amid surging expenses.
However, given its strong earnings in Q2 2023 and the potential recovery in H2 2023, this could be an attractive entry point for investors.
Recognising bright spots in the Singapore market
The first half of 2023 saw the Singapore market reflecting a dynamic and diverse tapestry of performances across sectors.
While finance, capital goods, transport, gaming, and healthcare showed promise, areas such as tech, property, and REITs experienced challenges.
Going forward into H2 2023, there are bright spots in Singapore, including the tourism industry, the capital goods sector with its strong order book, as well as the potential recovery in the tech sector.
As the year progresses, investors are encouraged to maintain a balanced perspective, recognising growth hotspots while remaining vigilant of evolving market landscapes.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
