GenS reported 3Q22 net profit of SGD135.8m (+2.1x QoQ; +1.2x YoY), bringing 9M22 net profit to SGD220.2m (+47.9% YoY). The results were above ours but within consensus expectations. The results beat was due to stronger-thanexpected recovery arising from better contribution from its affluent and premium customers and easing of labour shortage condition. We expect the recovery momentum to continue as GenS continues to benefit from the improvement in foreign tourist arrivals. Maintain HOLD with a higher TP of SGD0.87 (from SGD0.81) based on 9x of FY23 EV/EBITDA following our earnings revision.

Above ours but within consensus. GenS reported 3Q22 net profit of SGD135.8m (+2.1x QoQ; +1.2x YoY), bringing 9M22 net profit to SGD220.2m (+47.9% YoY). The results were above our (95.1%) but within consensus (65.4%) full year expectations. The results beat was due to stronger-than-expected recovery arising from better contribution from its affluent and premium customers and easing of labour shortage condition. Note that our comparison was computed using reported net profit and did not exclude any EIs as the breakdown of these items are not available in the quarterly business overview (official results are only released bi-annually).

Dividend. None (3Q21: None). 9M22: 1 Cent (9M21: None).

QoQ. Revenue increased by +49.1% contributed by gaming (+58.7%) and nongaming (+28.7%) segments due to (i) recovery in foreign tourist arrivals; (ii) higher contribution from affluent and premium customers; and (iii) weakness in preceding quarter due to limited capacity from labour shortage and lower hold percentage. Consequently, adjusted EBITDA increased by +73.3%.

YoY/YTD. Revenue increased by +1.1x YoY and +46.7% YTD contributed by gaming (+96.2% YoY; +34.4% YTD) and non-gaming (+1.4x YoY; +99.5% YTD) due to (i) return of foreign tourists from borders reopening; and (ii) easing of social restrictions. Consequently, adjusted EBITDA increased by +1.4x YoY and +36.8% YTD.

Outlook. GenS preceding quarter result was impacted by capacity constraint as a result of labour shortage. The situation had likely improved which contributed to the strong QoQ recovery. With gradual easing of labour shortage coupled with continued recovery in foreign tourist arrivals (foreign tourist arrivals +8.6% MoM in Oct, see Figure #2 and #3), we expect the recovery momentum to continue to 4Q. GenS SGD4.5bn RWS2.0 expansion is also progressing well and remain on schedule. RWS pivot towards curating and refurbishing its assets to attract the affluent market is aligned with the current visitation trend as Singapore strengthens its position as a regional financial hub which attracts wealthy tourists and business travellers.

Forecast. We increase our FY22/23/24 forecasts by +49.3%/14.2%/2.0% as we account for higher operating capacity and tourist arrivals assumptions.

We maintain HOLD with a higher TP of SGD0.87 (from SGD0.81) based on 9x of FY23 EV/EBITDA following our earnings revision. GenS should continue its positive recovery momentum benefitting from foreign tourist recovery as well as capacity increase as its labour shortage condition improves. The positive results this quarter should have a positive flow through to its holding company GenT.

Source: Hong Leong Investment Bank Research - 11 Nov 2022