Positive vibes for 3Q23F
- MBS’s adjusted EBITDA grew 43.1% yoy and 13.7% qoq to US$491m in 3Q23, higher than pre-Covid-19 levels in FY19 (113% of 3Q19).
- Gaming and non-gaming revenue saw healthy yoy growth of 36.9% and 28.9%, respectively, driven by robust recovery in tourism post the pandemic.
- Reiterate our Add call as we think GENS could see its profitability surpass pre-Covid-19 levels for the first time since the pandemic.
MBS 3Q23 results suggest robust growth in tourism sector
? Las Vegas Sands (LVS, Not-rated) reported Marina Bay Sands’ (MBS) 3Q23 hold-adjusted EBITDA (adjusted for win rate variance) grew 36.8% yoy and 10.7% qoq to reach 115% of pre-Covid-19 levels in 3Q19, although monthly flight capacity to Singapore from China only recovered to c.77% of 2019 levels in 3Q23.
? Gross gaming revenue grew 33.6% yoy and 10.0% qoq to US$883.6m in 3Q23, with VIP and mass gaming revenues climbing 32.2% and 34.3% yoy, respectively.
? Non-gaming revenue rose 28.9% yoy to US$317.0m, with revenue from rooms growing 35.9% yoy on higher RevPAR of US$656 (+32.8%), driven by an increase in daily average rates and more available rooms following the refurbishment of MBS’s suites.
GENS could surpass FY19 profitability in 3Q23F
? Following the positive read-through from MBS, we believe a similar level of quarterly growth (+13.7%) could put GENS’s adjusted EBITDA at 107% of the 3Q19 level, surpassing the pre-Covid-19 level for the first time since the pandemic.
? With this, we think that GENS will be able to achieve our FY23F adjusted EBITDA forecast of S$1.0bn, especially with its stronger VIP gaming segment compared to MBS and new keys added from the newly refurbished Ora Hotel.
Reiterate Add, attractive at near-bottom valuations
? GENS is currently trading at an attractive valuation of 5.7x 12-month forward EV/EBITDA, its lowest in five years, with an estimated dividend yield of 4.8% for FY24F.
? GENS previously reached a historical low of 5.3x in June 2016, when the gaming industry in Singapore was going through two consecutive years of revenue decline from 2014 following the anti-corruption campaign in Mainland China.
? Our TP of S$1.30 is pegged to 10x FY24F EV/EBITDA (five-year mean), providing attractive upside of more than 50%.
? Re-rating catalysts: sustainable profitability surpassing pre-Covid-19 levels and higher dividend payout.
? Downside risks: loss in gaming market share and tourists holding back on spending.
