Genting Bhd and Resorts World Bhd share prices took a battering on the KLSE yesterday, amid worries that the group's hospitality business will be affected by the war in Iraq and the outbreak of sickness caused by the atypical pneumonia virus in parts of Asia.
Resorts World plunged 65 sen or 7% to RM8.65 with 8.08 million shares changing hands, while Genting dipped 50 sen or 3.6% to RM13.40, on volume of 2.93 million shares.
Both stocks, the darlings of foreign fund managers, have now given up the gains made since the beginning of the year.
Selling pressure was stronger on Resorts World because its earnings were seen to be more vulnerable to the recent incidents by virtue of its direct ownership of the Genting Highlands casino and Star Cruises Ltd.
Genting, even though it will be affected, has a more diversified income base to help cushion the impact.
Anxiety had been exacerbated by news that two people had died of the pneumonia-like viral infection in Singapore and that schools there had been closed because of the outbreak of the illness.
Investors were clearly worried that this would affect Singaporean tourist arrivals to Genting Highlands and took that as an excuse to bail out of the two stocks.
“Singapore has put its people on high alert. So Singaporeans will think twice when it comes to travelling now,'' said a research manager.
Singaporeans account for about 25% of the total tourist arrivals to the hilltop casino.
Genting group management declined to comment when contacted by StarBiz.
An analyst pointed out that every 1% fall in tourist arrivals would result in an equivalent fall in Resorts World's net profit and a 0.6% drop in Genting’s.
However, the Iraq war and the outbreak of the deadly viral infection are expected to take a heavier toll on Resorts World's associate Star Cruises, whose cruise liners ply Hong Kong, Singapore and Hanoi.
“Star Cruises, whose ships are mostly docked in Singapore and Hong Kong, is likely to be affected more,'' said JP Morgan Malaysia vice-president Melvyn Boey.
Hong Kong and Singaporean travellers are the main income contributors for cruise liners in the region.
Shares of Star Cruises, which is 34% owned by Resorts World and listed in Hong Kong and Singapore, have also been under heavy selling pressure on both exchanges.
Its share price slid 15 HK cents or 8% to HK$1.70 in Hong Kong and 6.4% to 22 US cents in Singapore yesterday. The stock has now tumbled nearly 40% from its year's peak of HK$2.825 in Hong Kong.
Analysts said the stock had fallen out of favour with the impact of the Iraq war overshadowing the company's earlier recovery story.
“And now the virus scare has compounded the negative effects on the cruise liner operator,'' said an analyst with a foreign stockbroking house.
“The impact of all this on its cruise business is expected to be larger than on Genting group's casino operations because travellers tend to think that an air-born virus can spread more easily on a ship, which is a more confined environment.
Despite these concerns, analysts have yet to re-rate Genting and Resorts World as they expect these to be a short-term phenomenon and should not shake the fundamentals of the group.
“It is still too early to gauge the impact,'' said Boey.
Besides, the group had been able to deliver good results despite earlier concerns on terrorist attacks, analaysts said.
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