Gaming sector a safe bet

THE Toto jackpot drama last week has drawn some attention to the gaming sector, which involves players such as Genting Bhd and subsidiary Genting Malaysia Bhd (GenM), who are no longer part of the number forecast operator (NFO) business.

Four punters shared the RM121mil jackpot after it shot up almost RM30mil in three days following publicity in the media. That euphoria has thrown up some interesting observations about the behaviour of the public who endured long queues, and sometimes fights, to try their luck at Sports Toto Bhd outlets.

The episode seems to have been an impetus for investors to have keener interest in the gaming industry.Genting was at one time a substantial stakeholder in Jana Pendidikan Malaysia Sdn Bhd through its subsidiary Genting CSR Sdn Bhd.

Jana Pendidikan Malaysia runs the NFO firm Da Ma Cai through Pan Malaysian Pools Sdn Bhd.

Moving away from jackpots, a gaming sector analyst with a foreign research house tells StarBiz 7 that he is optimistic about GenM’s prospects for the year, buoyed by Malaysia’s tourism boom as a result of visa-free entries for Chinese and Indian visitors besides the upcoming Visit Malaysia 2026.

“GenM opened a mass gaming floor last month, in time to benefit from the upcoming Chinese New Year while the main Skycasino is fully occupied with gaming tables and slot machines, patronised by locals and foreign tourists,” he says.

He also predicts that GenM’s Resorts World Genting (RWG) tourist footfall is poised to return to the pre-lockdown level of about seven million visitors a quarter.

The analyst says the other catalyst for GenM is the New York downstate casino licence bid set to be awarded by end-2025, with submission to be completed by mid-year.

He believes this will turn Resort World New York City into a full-fledged casino to offer table games which can drive GenM’s gross gaming revenue up a notch.

“With the increase in wages and good employment, discretionary spending may see positive spillover effects for RWG theme parks, food and beverage, and entertainment hubs in its non-gaming portion,” he points out.

The analyst does not cover NFO firms in the gaming sector.

Chief investment officer at Tradeview Capital Nixon Wong notes that for NFOs, usually around 30% of sales would be channelled back to the holding companies such as STB and Magnum Bhd after excluding taxes and pool betting duties.

He agrees that GenM could be riding on the tourism recovery trend, but feels that the increase of minimum wages from RM1,500 to RM1,700 from next month could cut both ways for the NFOs.

Sports Toto and Magnum Corp are likely to be impacted by the minimum wage hike which may, however, be offset by higher betting volumes.

Looking at the gaming industry as a whole, Rakuten Trade head of equity sales Vincent Lau is of the opinion that it is largely defensive, as it may not attract certain institutional investors due to its “sinful” nature, but it has proven to be resilient during recessions.

“These are stocks that you would probably buy for their dividends, or you could always purchase a lottery ticket with some spare change.

“People would find reasons to have a wager during good or bad times,” he remarks.

He singles out companies such as GenM, STB and Magnum usually have their dividend yields around the 6% mark, which are comparable to real estate investment trusts (REITs).

A cursory check reveals that the respective annual dividend yields for GenM, Sports Toto and Magnum are 6.79%, 5.73% and 5.43%, respectively.

Lau adds: “Because NFOs take a cut of our bets anyway, the jackpot hype that adds to their revenue will only help them. This would at times be offset by big payouts, but they would still have profited.”