Recovery on the cards for gaming sector in 2022

KUALA LUMPUR: There could be a buying opportunity in Bursa Malaysia's gaming counters following the recent dip in share prices due to Omicron concerns, says RHB Research, which has an "overweight" call on the sector.

The research firm likes both Genting Malaysia and Genting as they are poised to return to profitability in 2022 with all their facilities having reopened.

It said in a report it does not expect the impact of the pandemic to be as severe as that in 2020 and 2021 while the earnings recovery should pick up the pace due to the easing of movement restrictions as the situation stabilises.

"Many countries are now better equipped and nimble in handling the pandemic. Coupled with the massive cost rationalisation efforts undertaken previously by the casino operators, these should partially cushion the impact.

"Both the casino operators will resume recovering after the Covid-19 situation stabilises," it added.

RHB said Genting is its sector pick for its attractive 6.2x FY22F EV/EBITDA valuation, providing a cheaper alternative for investors to position for a recovery play.

It added that Genting's diversified earnings base should enable it to weather through the uncertainties related to Omicron while the ramping up of Resorts World Las Vegas's business could see further upsides to its estimates.

Among numbers forecast operators, RHB prefers Magnum as its ticket sales recovery has been encouraging and is expected to continue due to the popularity of the games.

"Magnum’s FY22-23F dividend yield of c.7-8% is attractive for yield-seeking investors. Further upside to our forecasts include the potential introduction of stricter gambling laws," said RHB.
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