Genting Singapore Limited (SGX: G13) will renew the share buy-back program for 2022 to 2023. Genting will buy back the stocks in the stock exchange and offer to repurchase stocks in other channels except for market purchases.
The maximum offer is 105% of an average closing price(ACP) for market buy-backs and 120% for off-market buy-backs. The ACP is a price determined by the last 5 trading days when the company makes a buy-back offer.
The net profit for 2021 has grown by 2.65 times of 2020 to S$183.345 million. Diluted earnings per share are S$1.51 per share compared with S$0.57 for 2020.
The company will begin the expansion project of the integrated resorts at Sentosa island. The project is multi-phase expansion work, and the Minion Land and Oceanarium phase will commence in the 2nd quarter.
Established in 1984 and listed on the Singapore Stock Exchange in 2005, Genting performs the business of gaming and integrated resort development across Asia and Europe and Australia, and Central America. The group has won awards for its flagship project, one of the most prominent fully integrated resort destinations in Southeast Asia: “Resort World Sentosa” in Singapore.
Besides the destination resort, the company owns entertainment facilities, e.g., aquariums, adventure cove waterpark, the Universal Studios Singapore Theme Park, Mice Venues, hotels and restaurants, spas, and specialty retail outlets. Genting also runs casinos and sales and marketing support services to the leisure and hospitality-related businesses and investments segments.
A subsidiary of Genting investment holding company, Genting Singapore is a public listed company in Singapore with a market cap of S$9.5 billion and a component stock of the FSTE Straits Times Index.
Share Price and Target Price
The graph information comes from SGinvestors.io on Apr 16, 2022.
The graph information comes from SGinvestors.io on Apr 16, 2022.
What do Analysts Say?
Revenue: Genting’s revenue manages to adhere to 2020 under the challenging situation; most businesses, e.g., non-gaming, rental income, and hospitality, have registered flat and even less revenue except for the gaming sector compared with the previous year. Gaming revenue has grown by 14.57% to S$802.595 million from S$700.816 million by 2020.
Analysts forecast the gaming business will continue to grow in 2022, and other sectors will have modest improvements due to the relaxation of the Covid-19 regulations. However, it may take some time to recover to the pre-pandemic level. The Sentosa expansion project begins its construction phase in the second quarter and will not generate revenue until and beyond the first few years.
Profit: Net income has grown by 265%, from S$69,241 million to S$183,345 million. The increase is due to the containment of an account receivable impairment and a reduction in the cost of goods sold and operating expenses.
The management may find it more challenging to reduce one-off expenses in the future and focus on revenue growth.
Cash position: Genting has ample cash reserve to cope with operating activities and begin an expansion project like Sentosa recreational facilities. By the end of 2021, it has S$3,325 million cash on hand to cover the increase in the short-term borrowing of more than S$242 million for this year.
Interest rate hikes: 2022 will see the trend of increasing interest rates around the world. It is bad for business operations as surging interest costs increase pressures on operating and financing activities and reduce profits. Genting has modest debt relative to the market capitalisation, and the impact is minimal.
Inflation fear: With inflation accelerating due to supply chain clogs due to the Covid-19 and the fuel price rises and food shortages due to the war in Ukraine, global retail and leisure consumption will get a hit in the coming years. Businesses may find it hard to pass the rising costs to customers within a short time and may have to absorb and reduce profit margins.
Business outlook: With the pandemic subsiding, the Singapore Government is gradually reopening its borders and recovering its businesses. Yet the leisure and recreational industry may require a longer time to recover as the disease fear still lingers within communities worldwide. It may see the fastening recoup in the second half of this year at the earliest.
Most governments worldwide are still struggling to deal with the fight against the virus, and the consumer sentiment is low before containing the disease, and the optimism bounces back again. The company may have to dig out more sources of income for growth in 2022.
Equity ratio analysis
The price-to-earnings ratio: It is the ratio derived from dividing a stock price by the trailing twelve-month period earnings of a share. The ratio measures how much money is necessary to buy a dollar of earnings for a company. The current Genting ratio is 52x. It means 52 dollars are required to purchase a dollar of earnings and the industry and deemed high relative to the US peers of an average of 46x.
Trading volume: It is the Singapore exchange securities trading indicator, a leading and favorite ratio for active investors to gauge the price moment for the stock. According to Yahoo Finance, the trading volume for Genting is 15 million transactions for the past 10 days, while the trading volume is 22 million transactions over the past 3 months. Market interest in the share retreats and one reason may be holidays in between.
Debt-equity ratio: The ratio measures the leverage position of a company and its financial health. A high debt/equity ratio indicates more interest expenses and a tight financial situation due to scheduled repayments.The measure is total debt, including short and long-term loans, divided by the total equity. Genting’s ratio stands at a low of 3.14% and is free from default concerns.
The Working capital ratio: The gauge indicates a company’s ability to pay current liability with available resources. The derived ratio is dividing the current assets by current liabilities. Genting’s current assets are S$3,442 million, and current liabilities S$674 million. The calculated ratio is 3,442/674 = 5.11. It is about 5 dollars of current assets over one dollar of current liabilities – a sound liquidity position.
Dividend yield: As the name implies, the ratio measures dividends over a share price. Suppose you are an investor preferring regular income streams from a dividend-paying company; Genting may not be your preferred choice, excluding other considerations. Genting has a current dividend yield of 1.24% and belongs to capital appreciation investors rather than regular income investors.
Return on equity: The indicator measures how much net profit an investor has gained by deploying a dollar of equity. It is calculated by dividing net income by the share price on a per-share basis. The higher the ratio, the more an investor gains from his investment. The current return-on-equity ratio is 0.015/0.79 = 1.90% and deems low relative to others. The share price may have further room for growth due to global cash flow looking for quality assets and sheltering from emerging markets.
Is Genting a Good Stock to Buy?
Genting Singapore Ltd(SGX: G13) is a growth-oriented company in Singapore. Despite the Pandemic, it can maintain a profitable and healthy financial position over the past 2 years. With the Pandemic coming to an end, the company is more likely to benefit from the recovery due to business resumption though it may take longer.
However, it may confront the revenue issue in the post-pandemic and inflation environment in the next few years. Investors may benefit if the company can answer those 2 questions ahead.
Read more about the best stocks to invest in Singapore.
Genting Singapore is a quality company capitalizing on the leisure and gaming industry anticipating growth in the following years. It has a solid financial position with abundant cash reserves; nevertheless, its high price-to-earnings and low return-to-equity ratios may impede short-term investors away from it. Besides, investors should be vigilant about other businesses besides gaming.
- Genting Singapore is a constituent component of the FTSE Straits Times Index.
- The company operates the award-winning project “Resort Work Sentosa” in Singapore.
- Genting is a growth-oriented company with solid financial background.
- The growth faces headwinds like inflation and a post-pandemic economy.
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