A positive surprise could be on the table
- MBS’s hold-adjusted EBITDA (adjusted for win-rate) grew 22.5% yoy and 3.5% qoq to a record-high of US$473.0m in 4Q23.
- Rolling chip (i.e. VIP) volume grew 2.1% yoy compared to non-rolling chip and slot (i.e. mass) volume growth of 30.0% yoy and 43.9% yoy, respectively.
- A comparable set of financials from GENS should see qoq growth instead of our expected qoq decline in hold-adjusted EBITDA. Reiterate Add.
MBS continues to sustain profitability above pre-Covid levels
? Post US market close on 24 Jan, Las Vegas Sands (LVS, Not Rated) reported Marina Bay Sands’ (MBS) 4Q23 gaming revenues at US$741.0m, which grew 84.3% due to exceptional win rates. Adjusting for win rates, gaming revenues would have been lower at US$650.0m, still a respectable 61.7% growth yoy. However, adjusting for win rate would translate into a 6.9% qoq decline in gaming revenue instead of the reported headline growth of 6.2% qoq.
? MBS’s non-gaming revenue grew 14.3% yoy to reach US$320.0m in 4Q23 but was stable qoq as better F&B (+3.4% qoq) and events (7.8%) revenue was offset by a softer rooms revenue (-6.4% qoq) due to lower RevPar of US$611 in 4Q23 vs. 3Q23’s US$656 (-6.9% qoq).
What we expect for GENS’s 4Q23F
? GENS will report its 4Q23F/FY23F results on 22 Feb after trading hours. We estimate GENS to report 4Q23F adjusted EBITDA of S$276.8m, which will represent 8.1% yoy growth on the back of the higher (+36.3% yoy) international visitor arrivals (IVA) for Oct– Nov 23 against Oct–Nov 22.
? Our 4Q23F estimates translate into a set of results that is comparable to GENS’s 4Q19 financial performance of S$607.2m in revenue and S$287.6m in adj. EBITDA.
? There could be a positive surprise from GENS given our expectations of a qoq lower adj. EBITDA, given that we had expected lower VIP volumes due to outbound travel by VIP gamers in Singapore during the fourth quarter, which was observed over the past two years. We had also expected a qoq decline in non-gaming revenues as a result, but better room inventory management could support qoq growth in non-gaming revenues, in our view.
Reiterate Add; tourism recovery boost could continue into 1Q24F
? Our TP of S$1.30 for GENS is pegged at 10x FY24F EV/EBITDA (5-year mean), indicating a normalising profitability profile, although we think 1Q24F will continue to see positive yoy growth in revenue due to lower tourist volumes at 900k/month observed in the first quarter of 2023 against an average of 1.1m/month between Oct–Nov 23 and pre-Covid-19 levels of 1.6m/month during Jan–Mar 23.
? The gradual roll-out of new attractions, including the Forum area of the resort, Minion Land in Universal Studios Singapore, as well as the Singapore Oceanarium expected by the management to soft open in early-2025F as part of its RWS2.0 should support revenue and earnings growth from FY25F, in our view.
? Re-rating catalysts: continued outperformance in VIP market share by GENS against MBS, stronger growth of non-gaming revenue with the earlier-than-expected opening of Minion Land in Universal Studios Singapore as well as the Forum in 2024F which are currently expected to soft open in early-2025F.
? Downside risks: a lower-than-expected win rate for 4Q23F, loss of VIP GGR market share, a plateau in international visitor arrivals into Singapore as well as a recessionary environment resulting in lower spend per tourist.
