Still too early to bank in on a recovery for gaming sector
KUCHING: Despite clocking in improved ticket sales on average per draw basis for the past two quarters, analysts reckon that it is still too early to conclude that a recovery will occur in the near-term for number forecasting operators (NFOs).
To note, average ticket sales per draw were flattish for players such as Berjaya Sports Toto Bhd (Berjaya Sports Toto) in the first quarter of financial year 2018 (1QFY18) at RM20.2 million while Magnum Bhd’s (Magnum) 2QFY17 ticket sales rose one per cent year over year (y-o-y) to RM15.7 million per draw.
Analysts at Kenanga Investment Bank Bhd (Kenanga Research) saw that this increase in ticket sales were accompanied by a normalising luck factor for both NFO players as well.
In contrast, the research arm is of the opinion that luck factor for Genting Bhd (Genting) remains vulnerable despite its abating share price sell off.
While these were all a good signs for NFOs, the research arm was hesitant to bank in on a turnaround yet for both players as the RM476 million IBR tax claim for Magnum may take time to settle – leading to an overhang in its share price in the immediate term.
“Furthermore, the IBR tax claims on Magnum have also put pressure on Berjaya Sports Toto and the price overhang issues will continue until the tax penalty is settled,” added the research arm.
That being said, Kenanga Research guided that Magnum’s improving operating data and overdone sell offs of 19 per cent since 2QCY17 have led them to upgrade the stock to ‘Outperform’ previously.
This has convinced investors to relook this heavily bashed down yield stock – leading to a 4.62 per cent rebound since 2QCY17.
On the other hand, Genting and Berjaya Sports Toto’s share prices were observed to have fallen 2.18 and 2.37 per cent respectively against FBMKLCI’s -0.46 per cent while Genting rose slightly by 1.49 per cent in the past three months.
Despite the rocky share prices, Kenanga Research still anticipates for all gaming players to enjoy the year-end peak quarter coming ahead.
“This is especially so for Genting Malaysia, which may see some volume upside given the launch of non-VIP floor at SkyCasino in March and the VIP floor at the end of 3QCY17.
“Meanwhile, Genting Singapore has shown improvement of business volumes in recent quarters. Although this is still far from the peak, it could have bottomed out.”
For NFO players who typically do not have a year-end peak season for ticket sales, it is still expected that the usual yearly 20-22 additional special draw will lend support to its overall ticket sales base for the NFO players.
“Given the lack of convincing catalysts for the sector, we remain NEUTRAL on the gaming sector, as the Genting Integrated Tourism Plan expansion story has been substantially priced-in for the casino operator while luck factor remains a wild card to the NFO players,” concluded Kenanga Research.