KUALA LUMPUR: Gaming is a laggard sector that is poised to benefit from easing of travelling restrictions with Covid-19 vaccines expected to be rolled out soon.
Kenanga Research expects gaming companies' earnings to recover from the washed-out second quarter (Q2) of 2020.
Sector valuation remained attractive as gaming stocks were still 15-26 per cent cheaper than a year ago, the firm said in a report today.
Overall, casino players, which were badly hit, are expected to lead a swift earnings rebound as opposed to number forecast operators (NFOs) for which ticket sales are currently at 80-85 per cent of pre-Movement Control Order levels.
"We believe the gaming players, especially the casino operators will benefit from eventual borders reopening as well as vaccine rollout in 2021, as earnings will recover swiftly."
Kenanga Research expects Genting Malaysia Bhd to see strong local casino revenue with the opening of its outdoor theme park attracting tourists, while parent Genting Bhd should benefit from the strong Genting Singapore numbers which was fairly sustainable.
Genting and Genting Malaysia have seen their casinos across all geographical locations experiencing pent-up demand from the re-opening in the third quarter of financial year 2020 after the washed-out MCO-affected quarter in Q2.
Kenanga Research said although the authority had already approved the increase in special draws back to 22 draws in 2021 from only eight last year for the NFOs, it might not be earnings enhancing.
Continuous enforcement clamping down on illegal players remains the key to drive ticket sales, it added.
Kenanga Research still rates the sector "overweight" with Genting being the top pick for its deep value.
For income seekers, both NFO players Berjaya Sports Toto Bhd and Magnum Bhd offer above average yield of more than five per cent.