Analysts pick Genting Singapore top sector pick for its 2023 earnings recovery

UOB Kay Hian Research analysts have named Genting Singapore as their top sector pick for 2023.

Singapore.- Analysts Vincent Khoo, Jack Goh and Ng Jo Yee, from UOB Kay Hian Research, released a report where they are maintaining “overweight” on the Singapore and Malaysian gaming sectors and “market weight” on Macau gaming sectors, with Genting Singapore their top sector pick for its 2023 earnings recovery and capital management upside.

Their new target price of $1.15 (from $1.08 previously) for Genting Singapore is conservatively based on a 9.3x 2023 enterprise value-to-ebitda ratio (EV/ebitda), 0.5 standard deviations (s.d.) below the mean. 

“Following the past months’ stock rallies, the EV/ebitda valuations of the Macau gaming stocks under our coverage have rebounded significantly to above their pre-pandemic levels, as investors partly price in further GGR recoveries in 2024,” they said according to the information released by The Edge Singapore.

UOB Kay Hian analysts said that Genting’s Malaysian list, Genting Malaysia and Genting Berhad, are “conspicuous laggards”, held back by Genting Malaysia’s ill-timed related-party transaction and the lack of foreign interest in Malaysian equities.

“We prefer Singapore gaming to its Malaysian counterpart, partly because Genting Singapore has the highest reliance on mainland China patronage that accounted for an estimated 20 per cent of its pre-pandemic revenue,” they added.

In the note, analysts also said: “We believe that the market should sustain its positive sentiments towards Singapore’s gaming sector which includes Genting Singapore in 2023, anchored on the sector’s meaningful core profitability recovery which promises defensiveness amid current market volatility.”

See also: Genting Singapore posts net profit of US$96.8m for Q3