Uncertainty over how long the Covid-19 pandemic will persist has led to the downgrade of the gaming sector to “neutral” from “overweight”.
HLIB Research gaming analyst Andrew Lim said the movement control order (MCO), which was extended by two weeks, has leed to the closure of gaming operations for both the number forecast operators (NFO) and casino operators in Malaysia.
“As NFO operations do not fall under any essential services, they will be temporarily ceasing operations during the MCO and all purchased tickets for the respective draw dates within the period will be refunded, as there will be no prize claims,” Andrew Lim noted.
He added that there was the possibility of an increase in special draws to offset the tax revenue loss from the reduction in draws, given the extension in the MCO.
The government had last year lowered the number of special draws to eight days from 22 days.
As for Genting Malaysia, Lim said earnings for financial year 2020 (FY20) are expected to be affected with the closure of numerous operations in Malaysia due to the MCO, while operations in the US and UK would be temporarily closed until further notice.
“Given the rise in Covid-19 cases in both countries, we remain uncertain on the duration of the closures, ” he said.
As such, the research house had trimmed FY20 earnings in its previous report, representing a 50% decline year-on-year, to reflect lower visitor arrivals.
RHB Research, meanwhile, maintained its “buy “call on Genting Group, saying that while the pandemic should negatively impact its FY20 performance, earnings would eventually recover when the pandemic stabilised.
The stock, it said, offered a deep value proposition and is a cheaper proxy to the Japanese casino play.
Other Gaming Sector in Malaysia as for Genting Malaysia, it noted that Resorts World Genting (RWG) has been closed for the duration of the MCO.
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