Company Report: Goodwill Entertainment (GWEH SP/ GEH.SI)
Company Update: 14 November 2024
Strong local presence and growth potential.
- Stable F&B market. The F&B services market also demonstrates resilience. The Department of Statistics Singapore reported a 1.6% YoY growth in F&B sales in September 2024, following a 4.4% increase in August. Despite a slight MoM decline of 2.1%, the sector remains robust, with total sales reaching S$978 million, driven by higher consumer confidence and increased spending. Notably, online sales accounted for 23.9% of total F&B sales, reflecting a sustained consumer preference for digital convenience.
Growing demand for entertainment
The entertainment sector in Singapore is poised for continued growth, driven by positive demographic trends and economic indicators. According to the Singapore National Population and Talent Division, the total population reached 6.04 million in June 2024, a 2.0% increase from June 2023, with the non-resident population experiencing the highest growth at 5.0%. This increase, particularly in the non-resident population, is expected to boost demand for leisure and entertainment venues, as a larger and more diverse population typically leads to higher spending on lifestyle and social activities.
Robust labour market
The labour market in Singapore continues to be tight, with total employment increasing by 24,100 in 3Q24, more than doubling from the previous quarter. Low unemployment rates, at 1.8% overall, and stable employment growth in sectors such as Information & Communications and Professional Services support a favourable economic environment for entertainment and hospitality businesses.
Competitors
The entertainment sector in Singapore is highly competitive, characterized by low entry barriers and numerous players vying for market share. GEH competes on several fronts, including pricing, service quality, and strategic location of its venues. Key competitors in the entertainment landscape include established chains and integrated venues that target similar demographics. Notable players in related areas include KTV chains and entertainment complexes, like Teo Heng, Cash Studio, K Star Karaoke and Party World. Currently, no directly listed competitors exist on the Singapore Exchange. GEH must continually adapt to evolving consumer preferences and innovate to maintain its competitive edge.
Risks
- Economic uncertainty. Global economic conditions, such as inflationary pressures and export sector uncertainties, could dampen consumer spending and affect GEH’s revenue. The ongoing uncertainty in export-oriented sectors and a potential slowdown in employment growth beyond festive periods may also impact disposable incomes and entertainment spending.
- Operational risks. Rising operating costs, particularly in labour and rental expenses, pose a challenge. With Singapore’s labour market remaining tight, competition for talent and higher wage expectations could pressure profit margins.
- Secular changes. Shifts in consumer behaviour, including the growing preference for digital entertainment options, could require continuous innovation and adaptation from GEH to remain competitive.
- Regulatory risks. Stringent regulations governing entertainment and F&B operations in Singapore and across ASEAN countries could affect GEH’s expansion plans. The company must navigate licensing, safety, and labour regulations effectively to sustain growth.
- Supply chain vulnerabilities. GEH’s plans for in-house food and beverage production could be affected by supply chain disruptions, particularly if global economic uncertainties persist.
