Gaming stocks advance on reopening decision


  • Corporate News
  • Thursday, 18 Jun 2020

UOB Kay Hian UOBKH rated Berjaya Sports Toto (BST) a “hold” with an unchanged target price of RM2.46 that is based on 12 times FY21F price to earnings ratio. “We also maintain a buy call for Magnum with a higher target price of RM2.55 which is based on a 15 times financial year 2021’s (FY21F) forecast price to earnings ratio after imputing U-mobile’s option value, ” UOBKH said.

PETALING JAYA: Gaming companies saw some modest gains in yesterday’s trade following the government’s decision to allow the numbers forecast operator (NFO) companies to operate once again.

Magnum Bhd rose six sen to close at RM2.36 while Berjaya Sports Toto Bhd added two sen to RM2.30.

Casino-based gaming companies such as Genting Malaysia Bhd (GenM) and Genting Bhd also saw some gains in anticipation of its reopening.

Resorts World Genting will reopen on Friday but entry into SkyCasino at SkyAvenue and Genting Club at Genting Grand Hotel will be for Genting Rewards members.

GenM rose by 14 sen to RM2.74 while Genting added 17 sen to RM4.50.

According to the most recent publicly available statistics, gaming activities had contributed RM4.5bil to the Federal Government coffers between May 2018 to Sept 2019.

UOB Kay Hian Research (UOBKH) in its report yesterday said that it is expecting a swift recovery to pre-lockdown levels on the reopening of NFO companies.

The research house said the government’s movement control order (MCO) had led to a loss of 39 draw days for these NFO companies. “We expect ticket sales to swiftly normalise when the draws recommence, given the inelastic consumer base. NFOs could also benefit from the ‘revenge spending’ phenomenon, ” UOBKH said.

“To note, ticket sales was still intact before the MCO was implemented, and during the MCO period, we understand that Cambodia’s NFOs thrived (+20-30% daily betting), ” it added.

UOBKH which had maintained its overweight rating on the industry said the government might consider increasing or restoring special draws for NFOs to enhance federal government revenues for the year which can offset the shortfall in ticket sales.

It said that investment sentiment on NFO stocks should improve moving forward, as investor focus may switch to its fundamentally resilient business which can recover faster once the MCO is lifted.

For the casino based companies, UOBKH believes that Genting Group’s earnings will slowly recover in the second half of the year and since Resort World Genting’s casinos are highly dependent on domestic tourists.

But it noted that revenue recoveries will be weak as Resorts World Genting still relies on foreign tourists, and due to the reduced capacity for table games and social distancing set-ups.

The research house continued to rate a buy for GenM and Genting and notes that its preference is for GenM, with target prices of RM2.89 and RM5.77 respectively.

“We also maintain a buy call for Magnum with a higher target price of RM2.55 which is based on a 15 times financial year 2021’s (FY21F) forecast price to earnings ratio after imputing U-mobile’s option value, ” UOBKH said.

It rated Berjaya Sports Toto (BST) a “hold” with an unchanged target price of RM2.46 that is based on 12 times FY21F price to earnings ratio.

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