WHILE Malaysia continues to post record vaccination rate above 400,000 doses or precisely 424,541 doses administered yesterday (July 14), the good news was somehow marred by a spike in daily COVID-19 cases to another all-time high of 11,618.
Even amid an escalated detection of the Delta variant among COVID-19 patients, the positive effect of vaccination somehow points to a recovery for the gaming sector, driven by significant pent up demand waiting to be unleashed.
However, near term transitory headwinds remain fluid with the recent “delay” in migration to Phase 2 (initially set for June 28) seemingly obvious.
‘Till Malaysia migrates to Phase 3 and 4 of the NRP, these near term transitory headwinds for the gaming sector will still linger,” projected Hong Leong Investment Bank (HLIB) Research analyst Low Jin Wu in a gaming sector review.
“Taking cue from the NRP (National Recovery Plan), we believe that NFOs (number forecast operators) will be allowed to re-open in Phase 3 (estimated September-October) and RWG (Resorts World Genting) in Phase 4 (November-December) when interstate travel is allowed.”
The research house expects the possible reopening of NFOs during Phase 3 to enable Berjaya Sports Toto Bhd (BToto) experience an exponential recovery.
“Recall that the recovery in revenue for BToto was almost immediate when the Government moved from MCO (movement control order) 1.0 into CMCO (conditional MCO) and from MCO 2.0 into CMCO,” noted HLIB Research.
As for Genting Malaysia Bhd (GenM), the research house expects footfall and hotel occupancy rates of its RWG to bounce back strongly in FY2022 once a significant level of the population is inoculated.
“We believe that its current predicaments would only be transitory and we see a lot of value in GenM at this juncture,” opined HLIB Research.
“We expect the recovery of footfall into its casinos and occupancy rates for its hotels to be even faster than before due to new attractions sites like the Genting SkyWorlds Theme Park.”
Moving forward, the research house expects the successful launching of Resorts World Las Vegas (RMLV) to mitigate losses from GenM for its parent company Genting Bhd.
“We believe that the launch of its US$4.3 bil RWLV hotel-casino on June 24 to contribute towards Genting’s profit decently after its successful opening night which attracted more than 20,000 visitors,” reckoned HLIB Research.
“Nevada casinos recorded a gaming win tally of US$1.23 bil in May to mark a third consecutive month exceeding the US$1 bil mark. The three months ended May tally was circa 25% higher than the level seen in 2019 before the COVID-19 pandemic.”
Although the research house keeps its “neutral” rating on the gaming sector given “near term transitory headwinds remain fluid”, HLIB maintained its “buy” rating on BToto (target price: RM2.40); GenM (RM3.05) and Genting (RM5.75). – July 15, 2021
