Gaming Sector Set for Strong Rebound in Malaysia in 2H24
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Malaysia's gaming industry is on track for a significant revival in the latter half of 2024, according to Hong Leong Investment Bank Research (HLIB Research). The research firm has maintained an "overweight" rating on the sector, citing a combination of increased tourist arrivals and favorable regulatory changes as key growth drivers.
Casino operators stand to benefit immensely from the anticipated surge in tourism. The restoration of global flight capacity and the removal of visa restrictions between China, Malaysia, and Singapore are expected to fuel a steady influx of visitors. This uptick is projected to significantly boost the earnings of Genting Singapore Ltd, Genting Malaysia Bhd, and their parent company, Genting Bhd. While the region experienced a resurgence in Chinese tourism last year, numbers are still below pre-pandemic levels, indicating substantial room for growth. Both Malaysia and Singapore have ambitious targets for tourist arrivals in 2024, positioning gaming destinations like Resorts World Genting and Resorts World Sentosa for a substantial recovery.
Beyond the tourism sector, Genting's investment in TauRx Pharmaceuticals Ltd adds another layer of potential upside. The company's Alzheimer's drug, HMTM, has shown promising results in clinical trials, and a potential FDA approval could significantly enhance Genting's valuation. While competitors have entered the Alzheimer's drug market, TauRx's early-stage advantage and potential market share could translate into substantial gains for Genting.
The gaming landscape has also been positively impacted by recent legal developments. A High Court ruling in favor of gaming operators against the Kedah government's decision to cease issuing licenses has reduced regulatory uncertainties. This stability is expected to benefit operators like Sports Toto Bhd, which had previously faced challenges due to state-level restrictions.
While the closure of Sports Toto outlets in Kedah and Perlis impacted revenue, the overall impact is deemed relatively minor. HLIB Research anticipates a normalization of the NFO segment in the fourth quarter of 2024.
In conclusion, the gaming sector is poised for a strong rebound in the second half of 2024, driven by a confluence of factors including increased tourism, positive regulatory developments, and the potential success of Genting's pharmaceutical investment.
