THE re-imposition of the conditional movement control order (CMCO) in states where COVID-19 cases have spiked to worrying levels is expected to have only moderate impact on number forecast operators (NFO).
But the same cannot be said of the casino sector which is likely to take a hit from lower patronage due to the CMCO’s interstate travel restrictions on neighbouring states such as Selangor and Kuala Lumpur, according to UOB Kay Hian Research.
“We also acknowledge the risk of forced closure if the COVID-19 situation escalates although anecdotal evidence suggests that such a risk is minimal given the public’s good discipline in keeping to physical distancing and hygiene-promoting standards of practice (SOP),” wrote head of research Vincent Khoo in an update of the gaming sector.
As for the NFOs, the research house said its channel checks revealed that revenue generation has plateaued at 80%-85% of pre-MCO levels but would remain resilient during the two-week CMCO period “as punters have mostly adapted to the SOPs and are more willing to place bets at the physical outlets”.
Moving forward, Khoo expects the gaming sector and the casino sub-sector to be major beneficiaries of a COVID-19 vaccine discovery.
On this note, he reckoned that Genting Malaysia Bhd and Genting Bhd should re-rate when (their) sister company Genting Hong Kong secures equity funding to stay afloat, thereby eliminating concerns of a bailout.
“However, both stocks are likely to be excluded from the FBM KLCI in the upcoming review in December, which could create modest knee-jerk selling,” he added.
As a whole, UOB Kay Hian maintained an “overweight” rating on the gaming sector although it still expects the NFOs and casinos to regain their lustre by the first quarter of next year.
The research house also maintain a “buy” call on Genting Malaysia, Genting Bhd, Magnum Bhd and Berjaya Sports Toto Bhd. – Oct 16, 2020