Genting Singapore: Analysts lower targets, downgrade ratings as Q1 profit misses expectations

[SINGAPORE] DBS Group Research downgraded Genting Singapore to “hold” on Wednesday (May 13) and decreased its target price on the stock to S$0.67, in the wake of the company’s “disappointing” first-quarter results.Despite introducing new attractions at Resorts World Sentosa (RWS) – which it owns and operates – the group on Tuesday posted a Q1 performance that was notably below market expectations.Nomura analysts said the earnings “(disappointed) again due to low VIP market share and higher costs”.They described Genting Singapore’s earnings before interest, taxes, depreciation and amortisation for the period as “a significant miss, accounting for 18 per cent and 19 per cent of our previous and Bloomberg consensus estimates”, respectively, for the 2026 financial year.They lowered their rating on the stock to “reduce” from “buy”, and cut the target price to S$0.63 from S$0.95.Genting Singapore’s results suggest the need for a “comprehensive rethink of its operational strategy and asset enhancement initiatives... to restore the company to its historical profitability levels”, DBS said.The research house also highlighted the “significant competitive pressure” from rival Marina Bay Sands (MBS), which posted record profits for Q1.Meanwhile, CGS International (CGSI) Securities Singapore maintained “hold” on the stock, citing underwhelming gaming volumes and the pressure of elevated operating costs. It lowered its target price to S$0.67 from S$0.69.Gaming loss, competitive pressureNomura attributed the results miss to the “unexpected” 24 per cent quarter-on-quarter decline in VIP rolling chip volume to S$5.6 billion. It said this was contrary to seasonal trends, where Q1 is typically the peak quarter for gaming.The brokerage also noted that while MBS’ VIP rolling chip volume jumped 34 per cent on the quarter, RWS' VIP gaming market share declined to a record low of 20 per cent.CGSI believes MBS’ city centre location provides a superior captive environment for international tourists. “We believe it could be a ‘winner-takes-most’ situation for Singapore integrated resorts, in favour of MBS.”Similarly, DBS analysts said that RWS’ “positioning on Sentosa island, which is relatively less accessible, presents a locational disadvantage… As such, significant activation efforts are required to drive higher visitation”.They also noted that Genting Singapore “has been tightening credit extension, which may have contributed to lower VIP visitations”.Still, with overall industry growth remaining robust in Q1, the analysts think the “activations and renovations at RWS have yet to resonate sufficiently with its customer base to offset its locational disadvantage”.Staying under pressureGenting Singapore’s operating leverage is also expected to remain under pressure throughout the rest of FY2026.“We expect the remainder of the year to remain challenging, particularly amid headwinds from softer tourist inflows due to rapidly rising airfares,” DBS analysts said.“With VIP volumes likely to remain weak and operating costs elevated, we expect a meaningful loss of operating leverage.”CGSI also foresees the company’s operating expenses staying elevated as a result of new lifestyle and dining concepts introduced in April.It expects profitability to be “dented persistently”, with an “arduous journey” to improvement ahead.But despite downgrading its earnings outlook for Genting Singapore, CGSI said the company’s balance sheet anchors support for the stock.The group maintained a net cash position exceeding S$3.2 billion, allowing management to reiterate its commitment to an absolute dividend of S$0.04 a share.This translates to a forward dividend yield of around 5.8 per cent, which both DBS and CGSI believe will act as a floor for the share price amid operational challenges.Shares of Genting Singapore closed Wednesday at S$0.62, S$0.07 or 10.1 per cent lower.