Malaysia’s unity government is good news for country’s casino sector: UOBKH
Vivienne Tay
UOB Kay Hian on Tuesday (Nov 29) remained bullish on Malaysia’s casino industry but is neutral on number forecast operators (NFOs) due to a lack of mid to long-term growth prospects.
The optimistic view on casino operators comes as the newly-formed unity government dispels the research team’s earlier misgivings over future detrimental policies against the gaming sector.
Earlier, UOBKH analysts Vincent Khoo and Jack Goh had feared that the emergence of Parti Islam Se-Malaysia (PAS) as the party with the most parliamentary seats in GE15 would exert undue influence on the country’s governance and lead to the implementation of drastic policies targeting the gaming sector.
With Pakatan Harapan chairman Anwar Ibrahim being entrusted with forming a unity government, there are also hopes that political stability will come, the analysts noted.
They have maintained their “overweight” call on the casino subsector, with Genting Malaysia and Genting Berhad as its top picks with “buy” calls and target prices of RM3.50 and RM5.78, respectively.
Meanwhile, the research team has a “market weight” recommendation on NFOs. It maintained “hold” on Magnum and Sports Toto, with target prices of RM1.56 and RM1.78, respectively.
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UOBKH noted that gaming stocks are currently trading at one to 1.5 standard deviations below their mean valuations and now offer yields of up to 6.7 per cent following the recent selldown.
“The casino segment appeals the most with its high dividend yield, minimal downside policy risk and foreseeable domestic and external catalysts,” Khoo and Gosh said.
They also view Genting Malaysia’s failed bid for a Macau concession as a positive development, as the group will now have a healthy gearing ratio. It will also be able to focus on capital management or dividend payouts.
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The group’s pursuit for a gaming concession could be difficult due to the incumbents’ deep-rooted presence and two-decade track record in the market, UOBKH noted.
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