PETALING JAYA: The recovery in the travel and tourism sectors will have a positive effect on the gaming industry, particularly the casino and number forecast operators (NFOs).
Ticket sales of NFOs are projected to return to 90% of pre-pandemic levels by end-2023 largely on domestic-driven factors, with their earnings less directly exposed to external headwinds.
Kenanga Research’s top picks for the sector are Genting Bhd, since it is a proxy to the recovery in tourism in Malaysia and Singapore, and Sports Toto Bhd for its double-digit dividend yields.
The risk of casino and NFO licences being revoked in Malaysia has fallen following the formation of a “unity” government, the research house added. Kenanga Research has maintained its “overweight’’ stance on the sector.
Tourism Malaysia projects 16.1 million tourist arrivals to Malaysia in 2023, up 60% from the 10.1 million inbound number in 2022.
The research house believes Genting Malaysia Bhd will benefit from the revival and rejuvenation of domestic leisure travel, as local visitors made up about 80% of visitors to the Genting Highlands resort prior to the Covid-19 pandemic.
That said, there are business continuity concerns for NFO operations in Selangor, Penang and Negri Sembilan in the event of a change in the state government post-state elections, widely expected to be held in June.
But Kenanga Research expects Sports Toto to have a stronger recovery path with ticket sales returning to 87% of pre-pandemic levels by financial year 2023 ending June (FY23) and 90% by FY24. This is based on the potential boost from a spike in ticket sales of lotto games in the event their jackpots snowball.