PETALING JAYA: Analysts expect a positive outlook for the local gaming sector, on the back of rising tourist arrivals and improving sector fundamentals.
UOB Kay Hian (UOBKH) Research in a report said tourist arrivals are expected to surpass 2019’s levels.
“Tourism Malaysia announced that it is confident of achieving its 27.3 million foreign tourist arrivals target in 2024, on the back of the government’s charter flight matching grant incentive, visa liberalisation programme and increase in tourism promotional activities abroad.
“Among our sector coverage, the casino segment will be a direct beneficiary of higher inbound patronage. We remain upbeat that tourism-related investment ideas including the gaming sector will continue to be on investors’ radar this year.”
The research house noted that China’s rising outbound tourists are “adding to the growth equation.”
“Within China’s top three airlines, China Eastern Airlines is leading the recovery with international pax load reaching 89% of pre-pandemic’s level in March 2024, compared with China Southern Airlines and Air China’s 74% to 76% recovery.
“This is a significant uplift from December 2023’s 64% to 71%. With a further ramp-up of China’s international flight capacity and frequencies, we expect both Resorts World Genting (RWG) and Resorts World Sentosa to see better footfall and earnings inflow from China tourists throughout 2024.
“We also understand that China tourist visitations to RWG recovered to around 50% of 2019’s level, with progressive upside anticipated in coming quarters.”
With gaming companies gaining revenue resilience and steady streams of cash flow in 2024 (off the pandemic period’s low base), UOBKH Research said it anticipates a restoration of the pre-pandemic’s generous dividend payout of 4.6% to 8.2%.
“We expect Genting Bhd
and Genting Malaysia Bhd to potentially reinstate 19 sen and 22 sen dividends per share respectively from 2024 onwards, supported by healthy cash flow and low-to-moderate capital expenditure requirements. Number forecast operators (NFOs) have also guided their intention to restore pre-Covid-19 dividend payouts of 80% to 90%.”
While the NFOs are still facing market share challenges from illegal operators, UOBKH Research said there’s a gradual shift in punters’ habits that were previously executing bets through illegal bookies, as authorities accelerated clampdown efforts.
“Potential tailwinds may also emerge for the NFOs if the government allows legal operators to enable online operations.”
Additionally, UOBKH Research said RGB International Bhd is still well-positioned to capitalise on Asean’s booming gaming scene and exponential growth.
“While the Asean gaming scene, especially in the Philippines, remains highly charged with aggressive gaming capacity expansion and post-pandemic replacement cycle, RGB is poised to largely benefit from this trend.
“Key growth drivers arise from the Philippines’ mushrooming new international relations, friendly legislation such as higher slots capacity quotas and supportive remote gaming policies.”
