RHB Upbeat On Gaming Sector in 2022

RHB said that it remains long-term positive on the Gaming sector and believes that gaming stocks will recover strongly once the operating environment normalises.

It said that despite the risks posed by the Omicron variant, many countries are now better prepared in terms of their healthcare systems, to deal with the new variant.

Most of the population are also vaccinated, and vaccines can be tweaked in a shorter amount of time to be variant-specific. “Thus, we believe that the policymakers are unlikely to consider full lockdowns as it will severely impact the economy,” it said.

It said that the manufacturers of vaccines are also able to tweak the vaccines in a shorter amount of time to be variant-specific, as seen for the Delta variant. Moreover, booster shots are already underway. It is very unlikely that the government will consider another full lockdown, as it would be costly to the economy.

On stock picks, RHB said that Genting remains our Top Pick among the casino operators, due to its attractive 6.1x EV/EBITDA valuation vs the regional peer average of 11x, which provides investors with a cheaper alternative to position for the tourism recovery play angle.

Further upside could come from the stronger-than-expected RWLV contribution, as management mentioned that the group is still at the early stages of ramping up the business.

It said that a potential value-unlocking monetisation, via a listing exercise, is another major upside catalyst. Magnum remains the preferred NFO pick, as it is a sturdy pure-play NFO.

“Ticket sales recovery has been encouraging so far and will continue to improve as the games are still popular among punters. Magnum’s FY22-23F dividend yield of c.7-8% is attractive for yield-seeking investors,” it said.

RHB said that further upside to its forecasts includes the potential introduction of stricter gambling laws. Key risks to the sector include a fluctuation in luck factor, a prolonged pandemic, and changes in government policies.

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