Highlights

Malaysian gaming is expected to be rather quiet in 2014 given its mature market. BToto will continue to record steady earnings growth for its existing games while GenM’s Genting Integrated Tourism Plan (GITP) would only boost the group’s earnings beginning 2016.

Singapore’s gaming market have gradually recovered over the quarters with strong rolling chip volume. Non-gaming division is expected to continue growing at healthy rate.

Any expectations of exciting news or catalysts would largely come from international ventures such as US and Japan.

Resorts World Omni Center: Collaboration between GenM and Gulfstream Park appears to be a stepping stone for the group to enter into Florida market.

Resorts World Miami: GenM will continue to lobby for the approval to run a full-fledge casino in the state and approval of gaming legislation would be a boost to the group’s prospects and earnings.

Upstate New York: GenM may participate in the bidding process (Mar-June), results will be announced by fall.

Resorts World Las Vegas: GenT is still awaiting for approval to operate a casino in Nevada. Once approval is obtained, GenT would start construction almost immediately and is expected to commence operations (Phase One) in 2015.

Gaming legislation in Japan: We believe GenS will be interested in the bidding process to obtain a license to build an integrated resort in Tokyo or Osaka. Gaming bill will be debated in the current Diet and if passed, construction is expected to begin in 2017 in order to cater for Olympics 2020.

Catalysts

• Higher-than-expected visitors’ arrival into Malaysia.
• GenM’s UK development completed earlier-than-expected
• License to develop full-scale casino granted by New York’s and Florida’s legislators.
• GenS penetrates into international markets.

Risks

• Hike in gaming tax.
• Disappointment on the legalization of full-scale gaming casino in both New York and Florida.
• Failure in casino license renewal in Malaysia and Singapore.

Rating

OVERWEIGHT

Positives – (1) Defensive and monopoly industry

Negatives – (1) Highly regulated industry; and (2) Earnings highly dependable on luck factor

Valuation

We remain OVERWEIGHT on the sector with top picks according to preference:

• GenT (BUY; TP RM12.13)
• BToto (BUY: TP: RM4.57)
• GenS (BUY: TP: SG$1.67)

Source: Hong Leong Investment Bank Research - 20 Jan 2014