Malaysia's gaming sector, which has seen improved earnings results since the final quarter of last year, is expected to continue its recovery with a strong performance expected for the recent quarter.
With the first quarter of the year being a typically strong period, Kenanga Research is optimistic over the performance of gaming stocks especially with the improvement in the Covid-19 situation in Malaysia.
“The upcoming 1QCY22 [first quarter of the 2022 calendar year] results are expected to be seasonally strong with the CNY quarter for GENM while NFOs should also see uptick in ticket sales in the CNY-led seasonally strong quarter.
“Overall, as we enter the endemic phase of Covid-19, we expect a meaningful recovery for the industry players in 2022 and a full recovery from 2023 onwards,” it said, while reiterating its “overweight” call on the sector.
With regards to individual counters, Kenanga prefers Genting to Genting Malaysia due to the former’s deep valuation.
Genting also stands to benefit from the recovery plays in its portfolio, it added.
“More countries are in transition to endemic phase, Malaysia and Singapore included from April 1, which allow international tourists in without having to quarantine.
“This is expected to have positive impact on the casinos around the world under GENTING [OP; TP: 6.12 ringgit ($1.45)], GENM [OP; TP: 3.83 ringgit] and GENS [Not Rated],” it said.
In addition, the reopening of Resorts SkyWorlds in early February could help to broaden non-gaming revenue at Genting Malaysia, which Kenanga expects to hasten a recovery to pre-pandemic levels by the first half of 2023.
Meanwhile, it said numbers forecast operators (NFO) will remain the best-yielding stocks with a sustainable attractive dividend of more than six per cent.
“The current ticket sales trend is on track to meeting our expectations of a recovery to 80-85 per cent level in 1HCY22 [the first half of the 2022 calendar year] before a fully recovery in 2HCY22 [the second half].
“As such, this makes its attractive dividend yield, currently at greater than six per cent, sustainable,” it said.
It added that 2022 will be negatively impacted by the one-off prosperity tax but 2023 will see a full recovery in earnings.
Berjaya Sports Toto is its preferred pick in the NFO segment.
THE STAR (MALAYSIA)/ASIA NEWS NETWORK