All gaming facilities in Malaysia will be closed for 14 days (18-31 March), following the movement restriction order that was recently announced. We believe that the biggest loser from the closure is likely to be Genting Malaysia (GENM), as it will be shutting down all of its Malaysia operations. The impact on the NFOs is likely to be manageable, as they are only forgoing 6 draw days. Nevertheless, we are keeping our Underweight stance on the sector, as we believe the weak consumer sentiment is likely to dampen disposable spending.

Genting M’sia – Biggest Loser From Covid-19

GENM’s facilities (for gaming and non-gaming) in Genting Highlands will not be operational for at least 14 days. In 2018-2019, GENM generated around RM18-19m in daily revenue (gaming and non-gaming). GENM has also closed down its operation in New York, US for 2 weeks. We are lowering our EPS forecast for 2020 by 8.4% to factor in the shut-down for its Malaysia and US operations. Our numbers already assume a lower GDP growth forecast for Malaysia of 3.3% for 2020. We have also lowered our SOTP-based 12-month TP to RM1.92 (from RM2.10), and maintain our SELL call. Key upside risks: stronger-than-expected recovery in gaming volume, and aggressive cost-cutting measures.

Genting Berhad – Negatively Impacted Due to GENM Exposure

The impact for Genting Berhad is indirect, due to its exposure to Genting Malaysia, as it owns a 49% stake in the subsidiary. Although there are reports that some casinos on the Las Vegas strip will be closed for 15 days, we do not think it will affect the construction progress on Resort World Las Vegas (RWLV), which is scheduled to start operations by 2021. We have lowered our EPS forecast by 3.5% for 2020, and SOTP-based 12-month TP to RM4.30 (from RM4.55), but upgrading our call to BUY from Hold on valuation grounds. Key upside/downside risks: stronger/weaker performance of its key subsidiaries, and the recovery in commodity prices.

Berjaya Sports Toto – Impact Should be Manageable

Due to the restriction on movement, the Number Forecast Operators (NFOs) will be forgoing 6 normal draw days, which would likely result in a loss of revenue of around RM90m for Berjaya Sports Toto (BST). As a result, we have cut our EPS forecast by 4.5% for FY20. The impact is relatively insignificant, as the total decline in draw days is less than 4% out of the 168 available draw days for FY20E. We are keeping our DDMbased 12-month TP unchanged at RM1.76, and maintain our SELL call. Key upside risk: government allowing more draw (special/normal)days

Source: Affin Hwang Research - 18 Mar 2020