KUCHING: After a heavy selldown of gaming stocks in the past three months, the gaming sector’s value is emerging.
In a sector update report, analyst Kenanga Investment bank Bhd (Kenanga Research) reported that the gaming sector had experienced heavy selldown of their stocks in the last quarter.
Genting Malaysia Bhd (Genting Malaysia) especially was hit by ‘triple whammies’ in November that resulted in its share price plunging to a new low of RM2.79, the lowest in eight-years, before bouncing back to its current RM3 level.
Likewise, parent company, Genting Bhd (Genting) also took a dive as share price declined 21 per cent in the past three months.
According to the analyst, the heavy selldowns were mostly spurred by the announcement of casino duties increasing by 10 per cent effective January 2019 during the Budget 2019 announcement.
This was further exacerbated by Genting Malaysia’s filing of a US$1 billion lawsuit against Twenty-First Century Fox and The Walt Disney Corporations for the unexpected termination of 20th Fox Theme Park.
While the opening of the outdoor theme park is now left uncertain as the lawsuit continues, GenM should at the very least see improving visitor traffic with the GITP expansion program maturing.
“With the dust yet to settle, it was hit again with the huge RM1.83 billion impairment for the US Tribe’s promissory notes when it released its 3Q18 results on 30th November.
“By mid-December, it had lost 34 per cent of its value since early November, the steepest decline so far in such a short period. We believe investors need time to regain confidence in the stock,” said the analyst.
Similarly, parent company Genting was also sold down by investors.
Kenanga research believes this sell-down of Genting to be excessive as they noted the overall improved performance of Genting’s other assets, especially Genting Singapore which has shown continued and encouraging recovery in the past two years that looks to be sustainable.
“In addition, the soon to be started Japan’s IR bidding process will be the main attention in 2019. And, based on Singapore IR’s bidding experience in 2005-2006, investors snapped up casino stocks during the bidding period. This may augur well for Genting and Genting Singapore,” they added.
While the current issue with Genting Malaysia will continued to suppress Genting’s share price, Kenanga Research believes that they excessive heavy-sell down has allowed value to emerge from the stock as it is now trading at 50 per cent discount to its sum-of-parts (sop) valuation.
As for number-forecasting operators (NFOs), Magnum Bhd (Magnum) and Berjaya Sports Toto Bhd (Bjtoto) finally saw decline subsiding and performances stabilising in the past year.
Source: Borneo Post Online