KUALA LUMPUR (June 4): Phillip Capital has initiated coverage of the Malaysian gaming sector with an 'overweight' rating, and said gross gaming revenue growth is expected to be driven by higher foreign tourists’ visitations for Malaysia and Singapore.

In a sector update on Tuesday, the research house said international visitations for both Singapore and Malaysia had seen a robust recovery, with tourist arrivals reaching 91% of pre-Covid levels in the city state in January to April 2024, and 89% in Malaysia.

However, it said visitation volume from China remained slow for Malaysia, making up 45% of pre-Covid levels, suggesting further growth potential.

“As the sole casino operator in Malaysia, Genting Malaysia Bhd (KL:GENM) is well positioned to benefit from the recovery in both gaming volumes and non-gaming spending, driven by increased foreign and local visitations.

“The weaker ringgit also presents further upside for Genting Malaysia’s earnings. We anticipate that management will leverage its Genting Integrated Tourism Plan assets to drive higher yields,” the research house said.

“We recommend 'buy' ratings for Genting Bhd (KL:GENT; target price or TP: RM5.90) and Genting Malaysia (TP: RM3.45),” it said.

Phillip Capital said it likes Genting for its multipronged growth potential and attractive valuation trading at 4.6 times enterprise value/earnings before interest, taxes, depreciation and amortisation, while Genting Malaysia is preferred for its high liquidity and strong dividend yield of 6.2%.