KUCHING: The Genting Integrated Tourism Plan (GITP) remains the catch in 2018 in Malaysia’s gaming sector, analysts opine in an industry insight.
The research arm of Hong Leong Investment Bank Bhd (HLIB Research) believed that in Malaysia, the multiyear growth story of GITP will continue to be the catch for Genting Malaysia Bhd (Genting Malaysia) this year, which will be driven by the recently opened VIP gaming areas in November 2017, the upcoming indoor theme park by the first half of 2018 (1H18) and the much awaited 20th Century Fox World Theme Park by end-2018.
HLIB Research noted that the target of reaching 30 million of visitation by 2020 from the current 22 million level signifies a compound annual growth rate (CAGR) of circa 10 per cent from 2016.
On another note, growing optimism is seen in Singapore as the overall market condition has improved with higher gaming volume attributable to higher patronage coupled with the return of high rollers.
The research arm believed the earnings before interest, tax, depreciation and amortisation (EBITDA) margin expansion in 2017 after the cost rationalisation initiatives will continue to bear fruit moving into 2018.
HLIB Research also highlighted that with the growing middle class in China, the appetite of outbound travel has been growing tremendously and the trend is set to continue in 2018.
“Chinese are now the largest tourist arrivals group for Singapore and third for Malaysia,” it said.
“We believe the restrictions for Chinese to travel to South Korea could be beneficial to both Genting Malaysia and Genting Singapore.”
HLIB Research expected any favourable news from Japan pertaining to the casino bill in 2H18 will create excitement for Genting Singapore.
The research arm also noted that Resorts World Las Vegas is on schedule to open in 2020 while the casino plan in Miami may be revived.
“On the contrary, casino plans in Massachusetts are stalled due to the ongoing legal issue.”
As for the number forecast operator (NFO) market, HLIB Research expected it to be stagnant or decline due to cannibalisation from illegal operators which undermine the growth potential.
The research arm pointed out that in the absence of fresh catalyst, dividend yield of circa six per cent will continue to serve as the support for share price.
It noted that the immediate risk on tax hike is unlikely given that NFOs are still experiencing lacklustre sales outlook since the introduction of goods and services tax (GST) three years ago.
“Any increase in the gaming tax or pool betting duty may cause a lose-lose situation while benefiting illegal operators instead,” the research arm said.
Overall, HLIB Research maintained ‘overweight’ on the gaming sector as the research arm believed captivation of GITP expansions will continue to drive the market with the reopening of both indoor and outdoor theme parks, supported by the overall domestic growth upcycle theme while international operations continue to show stabilised and improved performances.
“The return of VIP players seen in the regional markets is the another stimulus for the sector,” it added.