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DBS expects Singapore’s inbound tourism to stay 'soft' amidst easing travel restrictions across Asia

Chloe Lim
Chloe Lim • 3 min read
DBS expects Singapore’s inbound tourism to stay 'soft' amidst easing travel restrictions across Asia
Singapore’s inbound tourism may remain soft until domestic health protocols are loosened: DBS Group Research
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DBS Group Research analysts Jason Sum, Paul Yong and Suvro Sarkar say that Singapore’s inbound tourism may remain soft until domestic health protocols are loosened, where pent-up travel demand will drive outbound tourism thereafter.

Hence, the analysts anticipate more upside for travel-related stocks, putting forward a “buy” rating for stocks from ST Engineering, SIA Engineering, SATS and Genting Singapore, with target prices $4.55, $2.65, $4.80 and $1.00 respectively, though remaining neutral for Singapore Airlines with a “hold” rating and target price of $4.90.

Shares from ST Engineering and Genting Singapore are the analysts’ top picks, as they seem most primed for strong earnings rebound in 2HFY2022 and cheap valuations. “We also favour SATS, but remain on the sidelines for Singapore Airlines, whose longer term prospects are already priced in, in our view,” say the analysts.


See: Only international visitors can help Genting Singapore recover revenue: analysts


See: SATS' ROE expected to return to 13%-15% by FY2025: CGS-CIMB

This comes at a time where travel restrictions in Asia are progressively easing, and the analysts expect more countries to open up moving forward in 2022.

See also: S-REITs ‘in better shape’ than two years ago; CICT, MLT top picks: HSBC

Sum, Yong and Sarkar do however expect inbound tourism to be “muted” at the present time for Singapore, given the high degree of safe management measures in Singapore. “We believe that the relatively elevated degree of restrictions in Singapore could impede or deter tourists over the next two quarters,” say the analysts.

At the same time, domestic health protocols are expected to ease over the next few months if domestic incidence rate trends lower and will eventually be drastically streamlined as Singapore transits to endemic COVID-19. As such, while travellers from the existing 16 VTL countries comprised about 30% of total tourist arrivals in 2019, the analysts expect this figure to jump to 60% by June 2022 and surpass 90% by December 2022. Robust outbound traffic is expected for 2022 given significant desire to travel among Singaporeans as well.

In addition, positive developments on antiviral pills could accelerate a turnaround in travel activity ahead of expectations, said the analysts. Healthcare companies like Merck and Pfizer have announced positive results for the world’s first COVID-19 antiviral pill, stating an efficacy rate of up to 89%. A greater proclivity towards oral treatments in the near future would enable people to recover at home, and alleviate the burden on hospitals, thereby promoting the lifting of protracted travel restrictions.

See also: Analysts upbeat on StarHub’s latest 1Q update

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With Singapore poised to add more countries to the VTL scheme as well, Singapore could be ‘90%’ reopened by December 2022. “Travellers from the 16 announced VTL countries represented close to 30% of total inbound tourists in 2019, and we believe that this figure could rise to at least 60% by June 2022 with the addition of the crucial Greater China market, Japan and Thailand,” say the analysts. Sum, Yong and Sarkar expect the figure to surpass 90% with the inclusion of other important source markets like India, Indonesia, Philippines and Vietnam.

Photo: Bloomberg

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