Kenanga Research upgrades local gaming sector to ‘overweight’


PETALING JAYA: Kenanga Research expects selling pressure on number forecast operators (NFOs) to bottom out this year, following an improvement in tickets sales coupled with better luck factor.

The research house has upgraded its recommendation on the domestic gaming sector to “overweight”compared with “neutral” previously.

“We believe 2018 would be an exciting year for the casino operators as the Genting Integrated Tourism Plan expansion story should be in time to bear fruit while the recovery of rolling chip volume across the causeway should benefit Genting Bhd.

“In addition, the impending legalising of casinos in Japan should boost sentiment for both Genting Singapore and Genting based on past experience in the Singapore integrated resorts bidding back in 2006,” it said.

With regards to selling pressure on NFO players, Kenanga Research said it was partly attributed to the implementation of the goods and services tax, while depressed ticket sales were primarily due to competition from illegal operators.

“With share prices contracted to half their values in the past five years coupled with price stabilisation in the past three months, stabilising ticket sales and improved luck factor, we believe the selling could have bottomed out.

“In addition, these two stocks also offer above-average dividend yields of 6% to 8%,” said the research firm.

Since 2013, ticket sales have declined coupled with the volatile luck factor. In fact, NFOs faced their worst performance last year, which saw share prices of Berjaya Sports Toto Bhd and Magnum Bhd plunging 22.3% and 20.9% over the year as opposed to 6.8% gain in the key FBM KLCI.

With the seasonally strong Chinese New Year in the first quarter of 2018, both casinos and NFOs should see better business volume, said Kenanga.

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