Hong Leong Investment Bank (HLIB) Research has upgraded its rating of the gaming sector from “Neutral” to “Overweight”, as countries become better at handling new outbreaks and investors become immune to Covid-19 related news.
In a report released last Thursday, HLIB said that though the recovery path of the gaming industry is likely to be choppy due to Covid, global governments are recognizing the detrimental effect that full lockdowns have on the economy and is steering away from those types of measures to fight the pandemic.
“Thus, this will help to pave a more sustained recovery path for gaming companies compared to 2021 when the industry was plagued with multiple prolonged lockdowns,” it said.
Investors are also becoming increasingly immune to reacting to outbreak news – though Malaysian gaming stocks fell on the discovery of the new Omicron strain, the stocks soon rebounded, according to a report from The Star.
HLIB said its top pick for the gaming sector is Genting Bhd, which it says is “trading at a huge holding discount of over 50% to its SOP (sum-of-parts) valuation”.
“We like Genting for its deep expertise and experience in managing the gaming and hospitality businesses and its well-spread operations across different regions, which help to mitigate regulatory and country risks. Furthermore, Genting provides exposure to RWLV (Resorts World Las Vegas), which we believe to have strong growth potential in the longer term.”
The research house also believes that prospects for Genting Malaysia Bhd (GenM) “are improving with the return of crowds to Resorts World Genting, SkyWorlds opening and positive contributions from its US and UK operations”.
