Casino Industry Boosts Capital Appreciation of Gambling Industry

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As interstate restrictions are lifted, Resorts World Genting (RWG) reopened on September 30th, and they expect Genting Group’s revenue to rebound significantly in the fourth quarter of 2021 and in 2022.

They pointed out that the suppressed demand of local tourists, who account for more than 70% of visitors to RWG, and the long-awaited opening of Genting SkyWorlds in November, are expected to drive rapid profit recovery.

“After nearly two years of border closure, the government is currently considering reopening the border for international tourists in November to revive the tourism industry, which will significantly boost the industry.”

Foreign tourists, especially those from ASEAN countries, accounted for about 25% of RWG’s visitor volume before the pandemic.

Analysts predict that the full opening of regional borders in the second half of 2022 will be the benchmark for recovery.

They said, “In addition to the good recovery of overseas business, especially the revenue of U.S. casinos, which has exceeded pre-pandemic levels, Genting and Genting are the best investment options to capture the post-pandemic leisure boom.”

As for the number forecast operators, analysts expect that there will be no further strict lockdowns as the government has clearly indicated that it will return to normalcy.

“Although the current recovery trend is lagging behind the reopening in the second half of 2020, we expect the number forecast industry to quickly achieve a significant profit recovery, reaching 80% to 85% of pre-pandemic revenue.”

They said that the recent lifting of the ban on foreign workers and the potential alternative of opening new draws may also boost the profit recovery of the number forecast industry to more than 90% of pre-pandemic levels as early as the first quarter of 2022, which will allow Magnum Bhd and Berjaya Sports Toto Bhd to restore their weekly interest rates of 5.8% to 6.7% in the past.

Considering the “hidden value” of holding 6.3% of U Mobile’s shares (book value: MYR 270 million or 7% of market value), HwangDBS Vickers prefers Magnum (target price: MYR 2.45), while the target price for Berjaya Sports Toto is MYR 2.46.

At the same time, they believe that the government is unlikely to raise the gambling tax or license fees for Genting Group and number forecast operators in the 2022 fiscal budget, as logically, the government needs to allow gambling companies to restore their sound financial position. Increasing the gambling tax would make Malaysia lose its competitiveness in the region, and increasing revenue would be counterproductive.

“The tourism industry plays a crucial role in Malaysia’s economy, contributing approximately 16% to the country’s gross domestic product (GDP) in 2019.”