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Hong Leong Investment Bank Upgrades Rating For Malaysian Gaming Sector

Posted on December 30, 2021 | 8:19 am

Hong Leong Investment Bank, one of the top investment banks in Malaysia, has decided to upgrade its rating for the Malaysian gaming sector as it is expected to perform very well over the next few years.

The investment bank released a report in which it detailed why it upgraded the rating of the gaming sector from “Neutral” to “Overweight”. The main reason is the better handling of novel coronavirus outbreaks by governments, and also a more moderate reaction from investors to news related to Covid-19.

In fact, when the news about the discovery of the Omicron strain broke, the stocks of Malaysian gaming companies did fall but they rebounded in a very short time and even went past the level that was recorded before the bad news.

However, the report from Hong Leong Investment Bank underlined that the recovery of the casinos and gaming industry might not be very smooth as new outbreaks and complications of the novel coronavirus pandemic are expected. There might be new lockdowns coming up, and those would surely have an impact on the gaming industry.

Nevertheless, the investment bank expects a more sustained recovery path for gaming companies in 2022 compared to 2021. Hong Leong Investment Bank also revealed that its best pick from the Malaysian gaming sector is Genting Malaysia Berhad, the famous global leisure and hospitality company.

About Genting, the investment bank report says that its stock is trading at a discount of over 50 percent to its sum-of-parts valuation. The report also pointed out that Genting has its operations spread across different regions of the globe and that helps mitigate risks, and also that the newly-opened Resorts World Las Vegas has immense growth potential in the longer term.

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Decreasing Revenue In Third Quarter

Despite the good prospects, Genting Malaysia Berhad had poor financial results in the third quarter of 2021. The Malaysian company reported revenue of 826.2 million Malaysian ringgit, which is equivalent to 172.7 million euros. The figure represents a decrease of 41.6 percent compared to the same period of 2020.

Most of the revenue during this period came from leisure and hospitality activities, not from gaming. Resorts World Kijal and the other locations Genting operates in Malaysia only managed to gather revenue of 17.1 million Malaysian ringgit in the third quarter, which is 1.16 billion ringgit less than what was recorded in the same period of last year.

The 99 percent decrease in revenue is due to the closure of Resorts World Genting as a result of the country’s government imposing a lockdown in order to stop the spread of the novel coronavirus. The property did not reopen until 30 September, the last day of the financial third quarter.

Source: “HLIB upgrades rating for Malaysian gaming sector, Genting top pick“Asia Gaming Brief. December 27, 2021.

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