KUALA LUMPUR: PublicInvest Research has revised downwards its earnings forecasts for gaming stocks and cut their target prices accordingly.
In a Monday research note, it said casino operators will be hit by higher licence fees and casino duties while number forecast operators' special draws will be cut by 50%.
"Based on our preliminary estimates, Genting Bhd (GENT) and Genting Malaysia (GENM) FY19-20F earnings will be reduced by about 10% and 30% respectively.
"Meanwhile, Magnum and Berjaya Sports Toto ’s (Btoto) FY19-20F earnings will fall by 6% and 10% respectively," it said.
The research house downgraded Genting Malaysia to underperform while maintained Genting at outperform as it believes the latter is oversold and the current valuation of 13x forward price-earnings is compelling.
"We retain our Neutral rating on Magnum and Btoto as we believe market has already priced in the impact of fewer special draws, given that this was first announced in August by the Minister of Finance."
The new target prices for the stocks are: Genting, RM10.70; Genting Malaysia, RM4; Magnum,RM1.80; and BToto, RM2.15.