The Straits Times Index (SGX: ^STI) pulled off a remarkable performance last year.
The bellwether blue-chip index recorded a total return (inclusive of dividends) of 23.5% in 2024.
However, not all index components benefitted from this surge.
Genting Singapore (SGX: G13), in particular, has suffered a steady share price decline.
Shares of the integrated resort (IR) operator have plunged 23% in one year, hitting their 52-week low of S$0.70 just recently.
Can the IR operator see better days ahead? Let’s find out.
A downbeat set of earnings
Genting Singapore reported a mixed set of earnings for 2024.
Although revenue rose 5% year on year to S$2.5 billion, gross profit fell by 5% year on year to S$836.1 million.
An increase in administrative and selling expenses led to net profit declining by 5% year on year to S$578.9 million.
The IR operator also generated a lower operating cash flow of S$859.7 million for 2024 compared with S$958.5 million in 2023.
Free cash flow came in at S$437 million, 30% lower than the S$630.9 million churned out a year ago.
A final dividend of S$0.02 was proposed, unchanged from the previous year.
In particular, investors were spooked by Genting Singapore’s second half of 2024 (2H 2024) results.
Total revenue fell by 12% year on year while net profit tumbled 34% year on year to S$222 million.
Visitor arrivals have yet to surpass 2019
Another problem facing the group is visitor numbers.
The Singapore Tourism Board (STB) recently released its 2024 visitor numbers and 2025 projections.
2024 saw Singapore attract 16.5 million visitors, which is at the top end of STB’s 2024 forecast, while tourism receipts are set to reach new highs.
For 2025, STB forecasts visitor numbers increasing to 18.5 million.
While this may seem like an improvement, it still does not surpass the pre-pandemic high of 19.1 million back in 2019.
The strong Singapore dollar isn’t helping, as visitors from Indonesia, Thailand, and Vietnam become more price-sensitive.
For India and China, visitor numbers were 13% and 3% below 2019 numbers, respectively, for 2024.
With Malaysia and Indonesia being the largest source markets for Singapore tourism after China and India, the strong Singapore dollar and the lack of a meaningful recovery are big concerns.
With visitor numbers still lagging behind 2019, Genting Singapore may have to contend with lower visits to its attractions.
Potential threat: the legalisation of casinos in Thailand
Another looming threat is the potential legalisation of casinos in Thailand.
The Thai cabinet has given in-principle approval for a draft entertainment complex business act on 13 January 2025.
If this goes ahead, it will disrupt the gaming landscape in Southeast Asia and could negatively impact visitor numbers at Resorts World Sentosa (RWS).
Thai casinos could divert important human traffic from key countries such as China, Japan, and South Korea away from RWS.
A DBS Group (SGX: D05) report stated that RWS derives 70% of its total revenue from foreign visitors, so any decline in tourist numbers because of new casinos in Thailand would flow down to Genting Singapore’s bottom line.
Rather than treat this development as competition, management has communicated its intention to possibly bid for the Thai casino licence to diversify its revenue stream.
Ambitious plans for 2025 and beyond
On the home front, RWS is forging ahead with its revamp, titled RWS 2.0.
The group is investing significant resources into a technology refresh that will embrace the use of artificial intelligence (AI) to improve efficiency and create personalised experiences.
These projects will stretch into 2025 and 2026 but management expects earnings to improve with the full launch of RWS 1.5 in the third quarter of 2025 (3Q 2025) onwards.
Universal Studios Singapore’s new themed zone, Illumination’s Minion Land, was opened in February 2025.
Meanwhile, investors can also look forward to the opening of a super luxury all-suite hotel and the Singapore Oceanarium in 3Q 2025.
Elsewhere, the news waterfront development at the heart of RWS 2.0 had its groundbreaking in November last year.
This project is slated for completion in 2030 and will feature a stunning waterfront promenade, a four-storey retail and entertainment complex, and two new luxury hotels with 700 rooms.
Get Smart: Risks looming on the horizon
Genting Singapore is facing several headwinds at the moment.
Visitor arrivals have yet to surpass their pre-pandemic levels while the threat of a Thai casino also looms large.
Although management intends to bid for the Thai casino licence, there is no guarantee the group will be successful.
Significant capital expenditure is also needed to fund RWS 2.0 initiatives that could result in lower earnings and a flat dividend moving forward.
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Disclosure: Royston Yang owns shares of DBS Group.
