KUALA LUMPUR: The recent strengthening of the Singapore dollar against other Asean currencies does not bode well for Genting Bhd subsidiary Genting Singapore plc, Affin Hwang Capital said.

The firm said this given that Asean tourists had been the major source of visitation given the lack of China tourists.

As such, Affin Hwang expects Genting Singapore to recoup around 50 per cent of its gaming revenue for 2022.

"Due to the lack of capacity of hotel rooms and limited flight availability into Singapore, the cost of travelling for tourists has been on the rise since the reopening of borders, which we believe could lower the spending power of foreign tourists on gaming activities, especially for the mass market segment," it said in a note today.

Affin Hwang said Genting Singapore's performance for the first half ended June 30, 2022 (1HFY22) was tracking behind both consensus and its expectation, as the net profit of S$112 million (+0.3 per cent year-on-year) is only 31 per cent of the respective full-year forecast.

Revenue for the period was S$663.1 million, up 20 per cent year-on-year, with increases especially pronounced for its non-gaming and other sources.

"We believe that the flattish gaming revenue growth quarter-on-quarter can be partly attributed to the increase in gaming tax of around three per cent (effective March 1, 2022). 

"Apart from the higher gaming taxes, the slow recovery in foreign tourists and the drop in local visitations has also limited the recovery during the quarter. 

"However, Genting Singapore is expecting stronger demand in the coming quarters, but there are concerns that the current capacity might not be sufficient, due to the lack of manpower. 

"Genting Singapore started their recruitment process but guided that the whole process might take six to 12 months or longer, as the shortage is across all sectors in Singapore," it said.

Affin Hwang has maintained its "Hold" call on Genting, with an unchanged target price of RM4.40.

"We are keeping earnings per share forecast unchanged for now, pending the release of Genting's results by end of the month. 

"We believe that earnings are only likely to return to pre-Covid-19 levels by 2023, with the assumption that China would ease on their zero-Covid-19 policy by then. 

"There is also downside risk to earnings for 2022 and 2023 given the current high inflationary environment," it added.