SINGAPORE

Analysts say they expect stocks of gaming companies such as Genting Singapore to stage a strong rebound in coming weeks.

This is due to easing concerns over Genting’s profit outlook and expectations of higher tourist arrivals that will provide a boost to earnings.

Analysts are bullish about the long-term prospects of the two integrated resorts here as tourist arrivals are expected to continue to rise over the next two to three years.

“The medium- to long-term story for tourism remains very strong,” says Mr Wong Sui Jau, Fundsupermart general manager, citing the 20 per cent growth in tourist arrivals last year.

However, some market watchers say the local gaming industry could face a policy risk. In a report on Monday, Nomura Equity Research said “investors may be concerned about sectors such as residential and gaming, which may be affected as a result of policy review”.

Genting shares traded at a low of S$2.08 to as high as $2.24 last week. They have since rebounded to close at $2.20 yesterday.

In a May 9 report, Credit Suisse research analyst Foong Wai Loke said the market consensus for Genting’s Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) remains very wide, ranging from S$1.4 billion to S$2.3 billion.

“This we believe contributes to its lacklustre share price performance,” his report said.

Still, Credit Suisse believes Genting can also benefit from the region’s active stock market which could be positive for VIP casino revenues, as well as strong commodity prices in Malaysia.

Ahead of Genting’s results announcement today, analysts said investors would rather sit on the sidelines.

“Genting’s results may surprise us. So I would say the verdict is still not out yet,” said Mr Liu Jinshu, investment analyst at SIAS Research, adding that investors will be looking closely at Genting’s profit margin and whether it will beat the lower-than-expected first-quarter results of Marina Bay Sands.

Last week, Marina Bay Sands’ parent company, Las Vegas Sands, reported that the profit margin at the Singapore resort was 48.6 per cent, down from 54.6 per cent in the fourth quarter of last year.

Analysts at Mumbai-based financial group IIFL which initiated coverage on Genting believes the stock is well-placed to capture the rise of gaming in Asia.

In a report on Monday, IIFL estimated the Asia-Pacific casino gaming sector would grow 24 per cent yearly to US$62.9 billion from last year to 2014.