Gaming and tourism lose ground as investors bet on steady profits: CGSI

AI exposure and higher interest rates help firms stand out from weaker sectors.

Gaming and tourism-focused companies are falling behind as choosier investors put their money into sectors seen as better placed to withstand cost pressures and economic uncertainty.

These firms are being weighed down by weaker visitor demand, higher operating costs, fuel-price pressures, and uneven post-pandemic tourism recovery, according to a CGS International report.

Meanwhile, investors are favouring sectors with clearer earnings growth, stronger pricing power, or exposure to artificial intelligence (AI) and higher interest rates, it added.

CGSI identified Genting Singapore as the weakest performer amongst its “dark horse” picks, with the stock down 16.4% year-to-date. Its net profit fell 55% to $65.2m for the first quarter ended 31 March 2026, dragged by lower gaming revenue and higher costs.

Resorts World Sentosa’s gaming revenue fell 7.8% year-on-year (YoY) to $403.4m, whilst Marina Bay Sands’ gaming revenue rose 31.4% over the same period.

In a separate statement, the company said geopolitical developments and conflict in the Middle East had pushed up energy, freight, and logistics costs, whilst higher airfares weighed on travel demand and consumer sentiment.

CGSI said Genting’s new attractions, including Minion Land, The Weave, Singapore Oceanarium, and The Laurus, grew non-gaming revenue by only 8.3%, which was not enough to offset the decline in gaming revenue.

The pressure comes as Singapore’s tourism recovery remains uneven. The country recorded 7 million visitor arrivals in the first five months of the year, down 1.2% YoY and 10% below pre-pandemic levels.

Singapore Airlines (SIA) also faces margin pressure from higher fuel costs and wider losses from its Air India associate.

CGSI expects the group’s earnings to decline about 30% in FY26, even as its core airline businesses in Singapore continue to see strong demand and yield recovery.

In May, SIA posted a 4.9% rise in passenger traffic, with its flagship airline and budget carrier Scoot carrying a combined 3.6 million passengers during the month.

The group may be able to recover around three-quarters of steep fuel cost increases through higher fares, supported by demand for Europe and Australia routes, the brokerage added.

Beyond tourism and aviation, industrial companies are also under pressure as investors wait for clearer signs of growth, including new contracts for Seatrium and ST Engineering and asset sales by Keppel.

Downstream agribusiness companies may face another risk from Indonesia’s new commodity export governance framework.

“Given that approximately 70% of Indonesia's palm oil exports are processed products, any state-linked platform imposing service fees will most directly affect integrated players and refiners,” CGSI said.

‘More money, fewer winners’ 

The pressure on these industries comes even as more money flows into Singapore stocks.

Securities daily average value exceeded $2b in February, the first time since March 2020, and stayed above that level for four straight months as of May.

Part of the increase was attributed to the Monetary Authority of Singapore’s Equity Market Development Programme. As of June, $3.95b of the expanded $6.5b programme had been allocated to fund managers.

Still, the extra money entering the market has not lifted all companies equally. CGSI said the market has limited breadth, with only two initial public offerings year-to-date, pushing more funds into large-cap stocks.

Three themes for the second half of the year include beneficiaries of a higher inflation environment, renewed interest in AI, and companies with defensive earnings growth, it added.

Banks are amongst the expected beneficiaries if interest rates recover. Meanwhile, the technology sector could also benefit from strong AI-related demand.