Tariffs, potential MSCI ousting may dampen Genting Singapore's expected H2 earnings uplift: DBS
This is as macroeconomic uncertainties, tariffs and a potential ousting from the MSCI Singapore Index threaten to dampen the improvements expected for its second half of 2025, said DBS.
The Singapore-listed subsidiary of Malaysian hospitality and leisure conglomerate Genting Group was set for year-on-year improvements on the back of recent launches and those in the pipeline – including the openings of hotel rooms, retail spaces and an oceanarium.
Instead, a more moderate performance for the latter half of the year is expected, wrote DBS analysts in a Thursday (Jul 10) report.
'We believe any uplift could be subdued given escalating macroeconomic risks and uncertainties – particularly high US tariffs set to take effect from Aug 1,' they said.
US tariffs aimed at South-east Asia exports range from 25 per cent in Malaysia to 36 per cent in Thailand as at the time of writing, the analysts said.
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They downgraded their rating for the counter to 'hold' and lowered their target price from S$0.90 to S$0.80, 8.1 per cent or S$0.06 above Genting Singapore's Wednesday closing price of S$0.74.
Softer gaming revenue
The analysts lowered earnings before interest, taxes, depreciation and amortisation forecasts for Genting Singapore by 2 per cent for 2025 and 3 per cent for 2026 on account of softer gaming revenue, as macroeconomic conditions in the region could weigh on inbound tourism.
They pointed out that the core clientele of Resorts World Sentosa – an integrated resort operated by Genting Singapore – comprises mainly regional tourists.
This group is likely to be 'disproportionately affected by economic pressures and more cautious with discretionary gaming spend compared to their Western counterparts', the analysts said.
'As these macro uncertainties are expected to persist into FY2026, we have accordingly revised down our earnings forecasts.'
Threat of being removed from MSCI Singapore Index
Beyond near-term earnings pressures, the 'lingering risk' of being ousted from the MSCI Singapore Index threatens to cap Genting Singapore's share price gains, the analysts said.
This comes as the company' share price decline pushed its float-adjusted market capitalisation to around S$4.4 billion, which is the lowest among existing MSCI Singapore constituents. The counter has fallen 3.3 per cent year to date from its closing price of S$0.765 on Dec 31, 2024.
While the current cut-off market capitalisation threshold for inclusion is not known, the analysts noted that it is likely to have risen above the previous cut-off of around S$4.75 billion during the May 2024 review. This is due to the rally of developed markets.
'Given this, we believe Genting Singapore faces a credible risk of exclusion in the upcoming MSCI review, with the next announcement scheduled for Aug 7, 2025, and any changes to take effect on Aug 27, 2025.'
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