Genting Singapore’s Resorts World Sentosa (RWS) is anticipated to experience a seasonal downturn in business volumes for the quarter ending June 30, 2024. This forecast, presented by financial services group Nomura, particularly highlights a decline in the VIP gaming segment. The expectation is drawn from recent trends observed at Marina Bay Sands (MBS), RWS’s competitor in Singapore, which reported a significant 26% decrease in VIP rolling chip volume for the same period. This drop is largely attributed to seasonal factors and disruptions caused by ongoing hotel renovations.
Overview of Recent Trends:
Marina Bay Sands (MBS) has recently disclosed a substantial quarter-on-quarter decline in its VIP gaming segment, which is considered a strong indicator for its Singaporean rival, Genting Singapore. MBS’s VIP rolling chip volume plummeted by 26%, a trend analysts link to seasonal fluctuations and ongoing disruptions due to hotel renovations. Although Resorts World Sentosa (RWS) and MBS do not always align perfectly in their business cycles, the reported decrease at MBS provides a valuable reference point.
Seasonality Impact:
Nomura analysts Tushar Mohata and Alpa Aggarwal predict a similar seasonal weakening in RWS’s performance. They point out that, historically, the gaming industry experiences natural fluctuations throughout the year, which can affect revenue and business volumes. The second quarter of the year often sees a dip in visitor numbers and gaming activity, which can contribute to reduced financial performance.
Impact on VIP Gaming Segment:
Nomura’s analysis suggests that the VIP gaming segment at RWS will likely show a quarter-on-quarter decline, mirroring the patterns seen at MBS. The VIP segment, which includes high-stakes gaming with significant rolling chip volumes, is particularly sensitive to seasonality and external disruptions. The analysts anticipate that RWS will face similar challenges due to these factors.
Overall Revenue and EBITDA Expectations:
The prediction for RWS’s second quarter revenue and adjusted EBITDA is expected to be softer compared to the first quarter. The anticipated decrease is attributed to the usual seasonal weakness in gaming volumes and the closure of the Hard Rock Hotel, which has likely impacted visitor numbers and overall revenue generation.
Future Outlook:
Despite the expected Q2 weakness, Nomura has maintained a “BUY” rating on Genting Singapore. The analysts believe that the temporary decline is anticipated and that investors will likely overlook the short-term dip in favor of longer-term growth prospects. For the full fiscal year 2024 (FY24), Nomura forecasts a 28% year-on-year increase in VIP rolling chip volume and a 5% rise in both slot handle and mass table drop. This optimistic projection reflects a gradual improvement in international visitor arrivals, particularly from China, which is expected to boost overall performance.
The analysis underscores a period of anticipated seasonal decline for Resorts World Sentosa, driven by the same factors affecting its competitor, Marina Bay Sands. However, the overall outlook for the year remains positive, with expectations of recovery and growth in the latter half of the year. Investors should consider both the short-term fluctuations and the long-term growth potential when evaluating Genting Singapore’s performance and investment prospects.