Prospects for gaming sector to make a turn for the better
KUCHING: After two years of uncertainties, the prospects of Malaysia’s gaming sector is expected to make a turn for the better, with the industry set to make a meaningful recovery in 2022, analysts observed.
“With Malaysia joining other countries in opening its international border last Friday as the country entered the endemic phase of Covid-19, prospects for the gaming sector which was hit hard in the past two years, are expected to make a turn for the better for a meaningful recovery in 2022.
“This is especially so for casino players where the latest fourth quarter of 2021 (4Q21) results season saw Genting Malaysia Bhd (Genting Malaysia) turning profitable for the first time in the past two years as RWG staged a strong turnaround while its UK and USA units continued to post commendable results. Thus, the international border reopening augurs well for Genting Malaysia and hence Genting Bhd (Genting),” the research team at Kenanga Investment Bank Bhd (Kenanga Research) said in a report.
The research team also pointed out that more countries are in transition to endemic phase, Malaysia and Singapore included from April 1, which allow international tourists in without having to quarantine.
“With the opening of outdoor theme park Resort SkyWorlds in early Feb, which could help to broaden nongaming revenue at Genting Malaysia, a recovery to prepandemic level is likely to be seen in 1H23. In all, Genting is expected to benefit from the reopening of Genting Malaysia and Genting Singapore and from the new wholly-owned Resort World Las Vegas (RWLV),” it added.
As for number forecast operators (NFOs), Kenanga Research said a full recovery of ticket sales is expected in the second half of 2022 (2H22).
“After a slow start post MCO 3.0 lockdown, NFO ticket sales have recovered swiftly to 80 per cent of pre-Covid levels in Feb from 50 per cent-60 per cent initially in midSeptember 2021. We believe the worst is over for the NFO operators BJTOTO and MAGNUM as new lockdowns are unlikely given that the country has entered the endemic phase from April 1.
“As a result, the current ticket sales trend is on track to meeting our expectations of a recovery to 80 per cent-85 per cent level in 1H22 before a fully recovery in 2H22. As such, this makes its attractive dividend yield, currently at more than six per cent, sustainable.
“Overall, while 2022 is still impacted negatively by the one-off prosperity tax, 2023 will be the full recovery year in earnings. Going forth, enforcement on illegal operators remain the key to ticket sales growth where the licensed NFO players saw their ticket sales growing substantially in 2H19 with strong enforcement on the illegal operators back then,” it said.
All in, Kenanga Research maintained its ‘overweight’ rating on the stock.
“It has been two years since the outbreak of Covid-19 that turned the world upside down with numerous lockdowns with the gaming sector one of the hardest hit sectors especially the casino operators.
“However, we believe the worst is over as more and more countries enter the endemic phase of Covid-19. As such, we believe that the gaming sector would be a major beneficiary of recovery theme in 2022,” it opined.