Better results likely in 4Q21 for gaming, casinos

by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL

THE gaming companies and casino segment is setting the course for steep earnings recovery in the fourth quarter of 2021 (4Q21), having Resorts World Genting (RWG) reopened on September 30 followed by the lifting of interstate border restrictions.

UOB Kay Hian Malaysia head of research Vincent Khoo said the tourism sector will continue to be the main beneficiary to the upcoming economy reopening as the pandemic eases, he expects more border relaxation and travel corridors to be initiated between Malaysia and the neighbouring ASEAN countries.

“In Malaysia, the tremendous pent-up demand from local patronage, which accounts for more than 70% of RWG’s visitorships, as well as the long-awaited opening of Genting Skyworlds outdoor theme park in November are also expected to stoke swift earnings recovery.

“Overall, the gaming companies and casino segment is on a sweet spot to capitalise on this post-pandemic leisure boom,” he told The Malaysian Reserve (TMR).

Genting Malaysia Bhd has narrowed its net loss to RM348.11 million in the second quarter ended June 30, 2021 from a net loss of RM900.42 million registered in the same quarter a year ago.

For the six-month period, the group’s net loss narrowed to RM831.7 million from RM1.32 billion, while revenue decreased 30.4 per cent to RM1.44 billion from RM2.07 billion.

Khoo expects a RM1.4 billion loss for 2021, factoring in that Genting Highlands remains shuttered throughout the entire 3Q21 and only allowed to reopen in Sept 30.

“We are forecasting a meaningful recovery in 4Q21 with earnings turnaround,” he said.

Empire Resorts Inc, in which Genting Malaysia has invested US$524 million over the past two years to revive its financial health, has sprung a positive surprise.

The casino operator has won a licence to offer mobile sports betting in New York.

At the moment, all eyes are on Genting Malaysia’s wholly-owned subsidiary, Resorts World New York City (RWNYC) which is in a good position to win one of the three downstate commercial casino licences offered by the New York State Gaming Commission (NYSGC).

The NYSGC has launched a request for information on three downstate commercial casino licences after a four-month delay.

Meanwhile, on the challenges and risks that operators might face, Khoo believed it will include resurgence of Covid-19 cases or re-impose of strict lockdowns.

“Nevertheless, we think that it is unlikely with Malaysia’s stellar vaccination milestone and gradually achieving herd immunity. Authorities have made it clear they intend to restore a semblance of normalcy even without eradicating the virus.

“Other challenges would include duty hikes and higher licensing costs from the government, but we also think that the government is unlikely to raise gaming duties or licensing fees on Genting Group as they would logically need to allow the gaming companies to regain sound financial footing, and as an abrupt rise in gaming duties would render Malaysia regionally uncompetitive and backfire on the need to raise revenue,” he explained.

He stressed that tourism plays a vital role in the Malaysian economy and contributed about 16% of the country’s gross domestic product in 2019  (pre-pandemic).

“We expect the resilient number forecast operators (NFO) sub-sector to stage a steep earnings recovery soon to reach 80% to 85% of pre-pandemic revenue, although the current recovery trend has lagged the previous re-opening phase (in the second half of 2020).

“The recent lifting of the ban on migrant workers as well as potential replacement draws through to 2022 are also expected to further revitalise the NFOs’ earnings recovery to more than 90% of pre-pandemic levels by as early as the first quarter of 2022, which will allow Magnum Bhd and Berjaya Sports Toto Bhd to restore their past dividends that would yield 5.8%-6.7% in 2022,” he added.