AFTER two years of dismal earnings results and price performance being a key victim of the COVID-19 pandemic, the gaming sector is expected to make a turn for the better with COVID-19 entering an endemic phase with higher vaccination rate keeping severe cases and fatality rate low.
With the re-opening of Resort World Genting (RWG) in end-September and number forecast operators (NFOs) in mid-September, Kenanga Research believes that the sector would be a major beneficiary of recovery play in 2022.
Maintaining an “overweight” stance on the gaming sector, analyst Teh Kian Yeong opined:
“We still prefer Genting Bhd (“outperform”; target price: RM6.38) over Genting Malaysia Bhd (“outperform”; target price: RM3.41) for its deep valuation as well as it to benefit from the recovery plays on Genting Malaysia and Genting Singapore Ltd (not rated) as well as the new wholly-owned casino Resort World Las Vegas (RWLV).”
For income seekers, the research house deemed NFOs as still the best yielding stocks for sustainable attractive dividend yield of >6% with Berjaya Sports Toto Bhd (“outperform”; target price: RM2.23) being both its preferred pick and top pick for 1Q CY2022 investment strategy.
With the re-opening of RWG and a significant improvement in Genting UK and US units after the reopening/relaxation of operating restriction since 2Q FY2021, Genting Malaysia is highly likely to turn around in 2022 after two years of loss-making which also resulted in Genting Bhd reporting dismal results.
“With the success of Langkawi travel bubble pilot project as well as the vaccinated travel lanes (VTL) between Malaysia and Singapore, we believe border reopening is near which should benefit RWG and turn Genting Malaysia profitable again,” projected Kenanga Research.
“Meanwhile, the new outdoor theme park Resort SkyWorlds is expected to be a major driver for non-gaming revenue for Genting Malaysia.”
As for NFOs, the research house expects a recovery to 80%-85% level in 1H CY2022 before a full recovery in 2H CY2022.
It further reckoned minimal impact on the NFO operators from the banning of NFO outlets by the Kedah state government given the small numbers of NFO outlets in the state.
“Berjaya Toto has only 20 outlets in Kedah which makes up <3% of the total 680 outlets throughout the country while Magnum Bhd has 13 outlets or <3% of the group’s total outlets of 485,” justified Kenanga Research.
“In view of small population of non-Muslim there, the actual impact to ticket sales could be even lower than <3%.” – Dec 28, 2021
