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Thursday, March 30, 2017

Kenanga sees good Q1 for gaming sector

Thursday, 30 March 2017

“The earnings driver in 2017 for Genting Bhd will be the Genting Malaysia Bhd’s Genting Integrated Tourism Plan (GITP) expansion programme, stable crude palm oil (CPO) prices while Genting Singapore plc’s (GenS) outlook remains challenging,” Kenanga Research said.It added that the usual yearly 20-22 additional special draws will provide a boost to ticket sales for number forecast operators (NFO)

PETALING JAYA: Kenanga Research expects a better performance in the first quarter of the 2017 calendar year for the gaming sector due to seasonality factors.

“Going forward, we expect strong revenue in the upcoming first quarter results due to the seasonality effect of the Chinese New Year (CNY).

“The earnings driver in 2017 for Genting Bhd will be the Genting Malaysia Bhd’s Genting Integrated Tourism Plan (GITP) expansion programme, stable crude palm oil (CPO) prices while Genting Singapore plc’s (GenS) outlook remains challenging,” Kenanga Research said.It added that the usual yearly 20-22 additional special draws will provide a boost to ticket sales for number forecast operators (NFO).

It noted that the latest reported fourth quarter of the 2016 calendar year that was reported saw industry players reporting satisfactory results with the exception of Berjaya Sports Toto Bhd (BToto).

Kenanga noted that BToto’s results disappointed for the third consecutive quarter despite a CNY ticket sales quarter which was not strong enough to create recovery traction.

It said casino operators, especially Genting, ended 2016 with a good set of results.

“All casino operations reported improved earnings except the UK unit due to higher payroll.

“In fact, GenS earnings beat consensus, reporting its first recovery in VIP business volume in more than two years,” it said.

Kenanga noted that while it remains neutral on the overall gaming sector, the casino sub-sector will continue to be the focus in the near-term given the GITP expansion program at Genting Highlands coupled with the liberalisation of the gambling industry in Japan.

“All said, Genting will be the clear beneficiary should a meaningful recovery occur at GenS and further improvement is seen in GenM,” it said.

Kenanga said it was impressed with the GITP program following its on-site visit to Genting Highlands in January.

“With the new casino floors and additional capacity coming on stream, this is a major earnings kicker for GenM, thus indirectly benefiting Genting as well.

Visitor numbers should increase further when GenP’s Genting Highlands Premium Outlet opens in the third quarter,” it said.

“This would turn the hilltop resort into a world’s class holiday destination while the brand new 20th Century Fox World Theme Park will be ready by year-end.

“All these will escalate its non-gaming business to another new level, making GenM the key focus for gaming stocks in the next one to two years,” Kenanga added.

On the other hand, Kenanga said NFO operators are still experiencing declining ticket sales and they have hit new lows in recent times.

“Both NFO players - BToto and Magnum Bhd continued to register declining ticket sales in the fourth quarter of 2016, which resulted in declining sequential results.

“With the declining ticket sales coupled with vulnerable luck factor, the earnings outlook for these two operators are at stake,” it said.

“However, there could be some positives for NFO players as the Deputy Prime Minister had stated in the middle of February that the Common Gaming Houses Act 1953 will be amended to combat online gambling.

“As illegal operators have been taking market share away from the NFO players, any new act is welcomed to deter gamblers switching to the black market,” it added.


Read more at http://www.thestar.com.my/business/business-news/2017/03/30/kenanga-sees-good-q1-for-gaming-sector/#4C2dL70v4TslARjd.99

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