Gaming company Genting Singapore saw its shares fall more than 9 per cent at the close of the local bourse yesterday, amid news of a $4.5 billion investment plan for Resorts World Sentosa (RWS) and a 50 per cent increase in casino entry levies for Singaporeans and permanent residents.
The counter was the most heavily traded yesterday, with more than 239 million shares changing hands. It closed at 97 cents, down 10 Singapore cents, or 9.35 per cent.
Bloomberg said this is the most the stock has slumped in almost four years and that at least six brokerages, including Morgan Stanley and JPMorgan, have lowered ratings on the casino operator.
Nonetheless, some brokerages are maintaining that the overall long-term outlook for the company is a positive one, even if there may be immediate headwinds.
OCBC Investment Research maintained a "buy" rating for the mainboard-listed company, pointing to the earnings certainty in the long term. Analyst Carmen Lee said RWS' attraction as a tourist destination is set to be enhanced due to new attractions, new hotels and a driverless transport system on Sentosa. Extensions to Universal Studios Singapore are also in the works.
"When fully developed, its (RWS) facilities will be able to capture more meetings, incentives, conferences and exhibitions attendees and more tourists to its expanded hotels and tourist attractions," Ms Lee said in a report, adding that a fair value of $1.31 will be maintained for the stock.
DBS Group Holdings analyst Mervin Song pointed to near-term headwinds from the immediate increase in entry levies and the 3 per cent increase in gaming taxes from March 2022.
"Given that a large proportion of the new hotel rooms and attractions are expected to be opened after 2022 when the 3 per cent increase in gaming taxes is implemented, there may be a short one-to two-year window when Genting Singapore's earnings are tempered," he said in a statement.
He told The Straits Times that this may explain the drop in Genting Singapore's shares as investors focus on negatives and the quantifiable impact of the gaming tax.
However, he said the increase in the tax rate may be offset by the opening of attractions such as the Singapore Oceanarium, an expansion of the present S.E.A. Aquarium, and growth in the overall gaming business.
"We believe the development of RWS 2.0 is a transformative event for Genting Singapore with potential for its gaming and non-gaming revenue to reach new levels beyond 2025," he said, maintaining a "buy" recommendation with a street-high target price of $1.54.
Maybank Kim Eng cut its recommendation from "buy" to "hold" with a target price of $1.12, saying in its report that it expects "short-term pain before long-term gain".
Its analyst Yin Shao Yang said in the report: "We fear the casino entry levy and tax rate hikes will weigh on short-term earnings before its potential is realised in 2024-2025."
Meanwhile, shares of Marina Bay Sands' operator Las Vegas Sands, which is also spending $4.5 billion to expand its integrated resort, rose at the opening bell by 0.2 per cent to US$64.30 (S$87) yesterday on the New York Stock Exchange.