KUALA LUMPUR (Jan 5): Hong Leong Investment Bank (HLIB) Research has maintained its “overweight” rating of the gaming sector, and said the sector had delivered a steady performance, with notable positive surprises for the third quarter of 2023.

It is confident that the recovery trajectory will be sustainable, especially for casino operators, underpinned by the restoration of global flight capacity and the recent visa-free travel pact between China and both Malaysia and Singapore.

In a sector update, the research house said that as for the number forecast operators, their outlook had stabilised and turned more favourable, with the political status quo maintained in the six state elections last year.

It said the likelihood of additional store closures in other states had diminished, with potential reallocation of closed outlets to other regions.

“All in, we stay 'overweight' on the sector, with Genting Bhd as our preferred pick,” it said.

HLIB anticipates continued earnings recovery for Genting Singapore (GenS) and Genting Malaysia Bhd (GenM) in 2024, benefiting Genting, driven by the ongoing rebound in tourist numbers.

“Resorts World Genting and Resorts World Singapore (RWS) are poised to gain from the anticipated revival of Chinese tourists, a crucial client segment for the gaming industry.

“While Singapore and Malaysia showed resilience as destinations for Chinese travellers in the third quarter of 2023, it's important to note that travel volumes were still 21% and 32% below 2019 levels, indicating further potential for recovery.

“Looking ahead to 2024, major music events like the Coldplay and Taylor Swift concerts in Singapore are expected to play a significant role in boosting tourist arrivals, particularly benefiting RWS,” it said.

HLIB said its preferred pick for the sector is Genting ("buy", target price: RM6.96), which is strategically positioned to capitalise on the recovery momentum of both GenS and GenM.

“We also view Genting as currently undervalued, trading at a 16% discount to the value of its holdings in GenS (valued at RM5.54 a share based on the latest closing price, and a Singapore dollar-ringgit exchange rate of 3.4).