PETALING JAYA: The visa-free travel narrative could boost the gaming sector earnings but not in the share price performance as it would likely be overshadowed by regional competition and cheaper regional casino stocks.
However, the tourism sector is likely to benefit more from the visa-free entry in Malaysia.
In terms of stock valuation, TA Research observed that the share premium of Hong Kong-listed casino stocks had narrowed to less than two times price-earnings ratio multiples above Malaysia-listed casino stocks.
This would be appealing to foreign shareholders, it added.
The research house said that at this juncture, it does not have a strong desire for Malaysian gaming stocks, except for Genting Bhd
given its potential upside of 12.5%.
TA Research also maintained its “neutral” stance on the sector with a “buy” call on Genting Bhd and a “hold” on Genting Malaysia Bhd.
It noted Chinese visitors form the third largest source of foreign tourists in Malaysia, after Singapore and Indonesia, with around 3.1 million tourists in 2019.
Likewise, visitor arrivals from China also represent the third largest source of foreign tourists for Resorts World Genting Highlands.
Genting Malaysia’s local operations have experienced significant growth in gross gaming revenue in the third quarter of 2023 (3Q23), which recovered to 93% of 3Q19 (pre-pandemic) levels.
Moving forward, it said Genting Malaysia’s gross gaming revenue (GGR) would continue to be driven by Malaysians day-trippers, who contribute to 70% of the group’s business.
The increase in Chinese tourists would play a supporting role to drive 2024 earnings higher, it said.
In addition, tourists from Singapore and Indonesia would also serve as major earnings contributors next year, as TA Research believes the current “cheap” ringgit would bode well for foreign visitations.
As for Genting Singapore, it has pledged to spend up to S$6.8bil capital expenditure (capex) on its new Waterfront development. Marina Bays Sand is also working on the expansion plan, which would comprise a new hotel tower with luxury rooms and convention facilities that may cost more than S$4.5bil.
TA Research said it expects the massive capex spend to translate to intensifying competition for Genting Malaysia, which completed its Genting Integrated Tourism Plan last year.
It added that GGR in Macau has risen tremendously since China’s reopening early this year. The GGR trend is closing in on its 2019 (pre-pandemic) levels with November 2023’s GGR stood at 70% the pre-pandemic levels.
Despite the strong GGR recovery, Macau stocks generally underperformed its regional peers, thereby making Macau casino stocks much more appealing to foreign investors, it said.
