Affin Hwang Has Lowered Genting’s Earnings Forecast

Affin Hwang Capital has lowered Genting Bhd’s earnings forecast for the years 2021 to 2023.

This is due to the possibility of a lower contribution from the group’s subsidiary Genting Singapore, as the new Covid-19 variant is expected to stifle the latter’s recovery.

“The discovery of the new COVID-19 variant has also forced some governments to implement more stringent border controls, which could further stymie international tourism recovery,” Affin Hwang said in a report released today.

Affin Hwang estimated that foreign tourists accounted for roughly 70% of Genting Singapore’s overall visitation before the pandemic.

“Over the past few quarters, without significant tourist contributions, Genting Singapore was able to regain only 43 percent of its pre-pandemic revenue, mainly from local visitation, but had remained relatively stagnant since then,” the firm says.

“While Genting Singapore could sacrifice margin to gain domestic market share, we believe that the upside is likely to be limited as its peers would likely follow suit as well. Despite the lack of foreign tourists, Genting Singapore’s current operations are still profitable.

“Due to lower earnings contributions from Genting Singapore, we have revised our Genting earnings forecasts for 2021-23 by 1.7 percent/-17.6 percent/-3.0 percent, as the discovery of the new Covid-19 variant is likely to delay the recovery of its earnings given its strong reliance on foreign tourists,” Affin Hwang says.

The firm, on the other hand, kept its target price at RM4.47 and maintained its “Hold” recommendation.

Through its Vaccinated Travel Lane, Singapore has opened its borders to tourists from over 23 countries and regions, with origin countries accounting for 57% of total visitation in 2018.

Genting Singapore contributed around 57% of Genting’s net profit in 2019.

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