Tourist Arrivals Propel Malaysia Gaming Growth in 2H24

Posted on July 26, 2024 | 10:40 am
Malaysia-and-Singapore-gaming-sectors-poised-for-robust-recovery-in-2H24-HLIB-Research

The gaming sector is set for a strong recovery in the second half of 2024 (2H24), driven by rising tourist arrivals and favorable regulatory changes, according to Hong Leong Investment Bank Research (HLIB Research). The research house maintains an “overweight” stance on the sector, citing several key factors supporting this optimistic outlook.

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Sustainable Recovery for Casino Operators

Casino operators such as Genting Singapore Ltd and Genting Malaysia Bhd are expected to see continued earnings recovery in 2H24 and beyond. This recovery is underpinned by the restoration of global flight capacity and the visa-free travel agreements between China and both Malaysia and Singapore. Genting, which owns significant stakes in both Genting Singapore (52.7%) and Genting Malaysia (49.5%), is well-positioned to benefit from this trend.

Despite resilience in 2023, travel volumes to Malaysia and Singapore from China are still below 2019 levels, suggesting further room for growth. Malaysia aims to attract 27.3 million foreign tourists in 2024, up from 20.1 million in 2023 and 26.1 million in 2019. Similarly, Singapore targets 15 to 16 million visitors in 2024, compared to 13.6 million in 2023 and 19.1 million in 2019.

“Resorts World Genting and Resorts World Sentosa are poised to benefit significantly from the recovery of Chinese tourist arrivals, a crucial client segment for the gaming industry,” HLIB Research noted.

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Stability for Number Forecast Operators

HLIB Research also highlighted a recent High Court ruling that deemed the Kedah government’s decision to stop issuing and renewing business licenses for gaming operators unconstitutional. This decision affirms that only the federal government has the authority to regulate gambling, reducing the risk of similar closures in other states and providing more stability for operators like Sports Toto Bhd.

Sports Toto’s 19 outlets in Kedah ceased operations on January 1, 2023, and outlets in Perlis followed in July 2023 due to similar regulatory issues. While these closures had a minimal impact, accounting for less than 2% of Sports Toto’s revenue, the ruling alleviates concerns over future state-level regulatory risks.

Looking ahead, HLIB Research expects Sports Toto’s number forecast operator (NFO) segment to normalize in the fourth quarter ended June 30, 2024 (4Q24) following seasonally stronger sales in 3Q24.

Sources:

, The Star, July 23, 3034.

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