KUALA LUMPUR: Genting Bhd's earnings forecast for financial years 2021 to 2023 has been lowered by Affin Hwang Capital.
This is due to possible lower contribution of the group's subsidiary Genting Singapore as the new Covid-19 variant is likely to dampen the latter's recovery.
Singapore has opened its borders for tourism to residents of over 23 countriesand regions via its Vaccinated Travel Lane, whereby origin countries generated 57 per cent of the total visitation in 2018.
"The discovery of the new Covid-19 variant has also forced some governments to implement more stringent border controls, which could further hamper the recovery in international tourism," Affin Hwang said in a report today.
Before Covid-19, Affin Hwang estimated that foreign tourists contributed to around 70 per cent of Genting Singapore's overall visitation.
Over the past few quarters, without significant tourist contributions, Genting Singapore was able to regain only 43 per cent of its pre Covid-19 revenue, mainly from local visitation, but had remained relatively stagnant since then, the firm said.
"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.
"We have revised our Genting's earnings forecasts for 2021-23 by 1.7 per cent/-17.6 per cent/-3.0 per cent due to lower earnings contributions from Genting Singapore, as the discovery of the new Covid-19 variant is likely to delay the recovery of its earnings given its strong dependence on foreign tourists," Affin Hwang said.
The firm, however, kept its target price unchanged at RM4.47, and maintained its "Hold" call.
In 2019, Genting Singapore contributed around 57 per cent of Genting's net profit.