The outlook of the travel and tourism industry is important to an integrated resort (IR) developer such as Genting Singapore Limited (SGX: G13).
Since the last update on its earnings in November 2022, there have been further relaxation of travel rules that favour the group’s performance.
Chief among them is the reopening of China’s borders.
Although the Singapore Tourism Board expects this year’s visitor arrivals to only reach between 30% to 60% of pre-pandemic levels, Genting Singapore’s share price has nonetheless performed well.
Since the beginning of December 2022, its shares have risen by 13.6%.
Let’s find out if the fiscal full-year 2022 results live up to the market’s upbeat expectations.
Travel recovery supported revenue and profits
After two tepid years which saw disappointing revenue figures for 2020 and 2021, Genting Singapore’s revenue for 2022 finally jumped by 62% year on year to S$1.7 billion.
Both the gaming and non-gaming divisions contributed to this positive result.
Gaming revenue increased by 53% from last year’s S$802.6 million to this year’s S$1.2 billion, while non-gaming revenue surged by 90% year on year, posting a 2022 revenue of S$490.8 million.
Operating profit more than doubled year on year from S$227.8 million in 2021 to S$456.4 million in 2022.
Meanwhile, net profit for 2022 surged by 85% year on year to reach S$340.1 million.
The rise in net profit was comparatively more muted than the increase in operating profits due to higher utility costs, increased casino tax rates, and accelerated depreciation on assets relating to the group’s ongoing renovation and expansion plans.
Robust financial position and cash flows
Despite the challenging conditions over the past two years, the group braved the storm while maintaining a strong balance sheet.
Debt was brought down to a low level of S$5.5 million after a full redemption of nearly S$200 million of unsecured and unsubordinated bonds in October 2022.
In comparison, Genting Singapore’s cash balance of S$3.5 billion dwarfs its borrowings.
A deeper dive into its cash flows reveals that operating cash flows increased by more than S$400 million year on year to S$806.7 million.
This was predominantly a result of the group’s profit before tax more than doubling in 2022.
Capital expenditure was dialled down in 2022, resulting in free cash flow sharply reversing from negative S$567.1 million in 2021 to positive S$619.7 million in 2022.
New initiatives come online in 2023
Even though Genting Singapore posted much better financial results in 2022 than the preceding two years, the gears for the group to outdo its most recent performance are already turning.
Against the encouraging backdrop of increasing flight connectivity and capacity, 2023 will also mark the commencement of some of the IR operator’s ongoing initiatives.
For example, the group will launch the first Southeast Asian exhibition that combines art and virtual reality in March 2023.
Two months following that, it plans to unveil the newly-renovated Festive Hotel as a lifestyle destination hotel.
The refurbished hotel will add 389 rooms to the group’s overall hotel inventory.
RWS 2.0 transformation is on track
The expansion projects centred around Resorts World Sentosa (RWS) are on track to be completed by late 2024.
Over the next two years, more than 20,000 square metres of commercial space will undergo a major transformation.
The completed site caters to a wide range of entertainment, retail, and dining options for visitors.
Given the plentiful floor space, the newly-upgraded venue will serve as the ideal setting for more intimate lavish events such as banquets and seminars, or large-scale happenings such as concerts.
While we await for the facelift to be completed, RWS continues to attract more footfall that will boost its 2023 numbers.
As a testament to the desirability of its prime location, RWS was once again elected as the official venue to host premium events that will likely attract wealthy patrons.
One such event is the celebration of the 10-year anniversary of Asia’s 50 Best Restaurants 2023.
Another noteworthy mention is the Wine Pinnacle Awards 2023, which returns to RWS for its third edition.
These events will help to improve the visibility of the IR, increasing its attractiveness as a leisure and business destination for locals, tourists, and corporations.
Final dividend doubled
Genting Singapore has declared a final dividend of S$0.02 per share in line with the improved results.
This is double the final dividend announced for 2020 and 2021.
Together with the interim dividend of S$0.01 per share declared in its fiscal 2022 first half (1H2022) earnings, this brings the total 2022 dividends to S$0.03 per share.
In turn, this translates to a trailing dividend yield of 3.0%.
Combining the most recent strong financial results with the alluring prospects of further tourism recovery, investors may be rewarded with even higher dividends going forward.
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Disclosure: Tan Ke Xuan does not own shares in any of the companies mentioned.
