Good year to bet on gaming sector
KUCHING: 2018 may be a good year to bet on the gaming sector as casino operators are expected to ride on several tailwinds, while declining ticket sales in number forecast operators ( NFOs) seems to be finally abating.
According to Kenanga Investment Bank Bhd ( Kenanga Research), 2018 is an especially exciting year for casino operators like Genting Bhd ( Genting) as the Genting Integrated Tourism Plan ( GITP) expansion story should be bearing fruit shortly alongside a recovering rolling chip volume across the causeway.
And internationally, the impending legalising of casinos in Japan should boost sentiment for both Genting and Genting Singapore Plc ( Genting Singapore) based on the Singapore IR bidding back in 2006.
“Meanwhile, Genting Singapore had raised 20 billion Japanese yen Samurai Bond in Japan in October following the establishment of a branch there. This is earmarked for preparatory works in anticipation of the new casino there.
“This shows that its keen interest in this new market. With the election over, the government is expected to table the bill next summer in 2018,” explained the research arm.
Based on these factors, Kenanga Research reckoned that Genting’s current huge discount of 45 per cent to its sum of parts valuation – which is close to its 10- year discount of 47 per cent – is unwarranted.
“In fact, this is also much lower than its 5- year average discount of 37 per cent,” opined the research arm.
Looking towards the NFOs, Kenanga Research believes that selling pressure of their shares is finally bottoming out as share prices have stabilised in the past three months alongside improving ticket sales and luck factor.
Previous selling pressure in shares of Magnum Bhd ( Magnum) and Berjaya Sports Toto Bhd ( BJToto) was partly attributed to the implementation of the GST as NFOs were force to absorb in its revenue line while depressing ticket sales were primarily due to competition from illegal operators that offer better flexibility and higher prize payout said the research arm.
Besides improving environments, both the casino and NFO segments are now heading into the seasonally strong Chinese New Year ( CNY) period in the first quarter of 2018 ( 1Q18), which should allow the gaming sector players to enjoy better business volume.
Genting Malaysia Bhd (GENM) especially will be expected to see volume following the launch of GNEM’s non- VIP floor at SkyCasino last March and the VIP floor at the end of 3Q17.
Additionally, GENM’s earnings from its Resort World New York should improve while GENS’ business volume should continue to follow its current trend of improvement in recent quarters.
“All these developments at GENM and GENS should benefit Genting directly,” said Kenanga Research.
Meanwhile, the usual yearly 20 to 22 additional special draws this period should lend support to NFO players by lending support to their overall ticket sales base in 2018.
All things considered, Kenanga Research opines that 2018 will be an exciting year for the gaming sector and are upgrading their view on the sector to ‘ overweight’ from ‘ neutral’.