Cautiously optimistic despite the Omicron wave
Maintain POSITIVE view
Initially, we were concerned that the Malaysian gaming industry is in for another difficult year as new COVID-19 cases are surging due to the Omicron variant. That said, the Omicron variant’s low mortality rate assuaged our fears. We posit that Malaysians are still inclined to participate in gaming despite the risk of being infected with COVID-19 as long as the risk of serious health complications is low. We maintain our earnings estimates, TPs and calls. We like GENM, GENT, MAG and BST.
MY going through an Omicron wave
With Malaysia going through another surge in new COVID-19 cases (14 Feb 2022: 24,340) due to an Omicron wave, we ask ourselves whether the Malaysian gaming industry will go through another year of lockdowns, leading to another year of losses or reduced earnings. Even in the likely event that lockdowns are not imposed, we ask ourselves if the surge in new COVID-19 cases will cause RWG and NFO outlets to experience reduced visitorship, leading to losses or reduced earnings. Thus, we look overseas to glean insights regarding potential impact on operations from countries that experienced their Omicron waves first.
US, UK & AU experience suggests minor impact…
The United States, the United Kingdom and Australia had their Omicron waves commence relatively early in Dec 2021, causing new COVID-19 cases to surge to record highs. One would be forgiven for believing that gaming in these 3 countries would come to a screeching halt. To our positive surprise, interest in retail and recreational activities (which presumably includes gaming) in each of the 3 countries was only
negatively impacted in a minor way. Positively, Las Vegas Strip gross gaming revenues (GGR) continue to trend strongly.
… thanks to Omicron’s low mortality rate
While new COVID-19 cases have surged to record highs in these 3 countries due to the Omicron variant, new COVID-19 deaths have by and large not. This suggests to us that people are more inclined to participate in retail and recreational activities (including gaming) despite the risk of being infected with COVID-19 as long as the risk of serious health complications, including potentially death, is low. Thus, we are cautiously optimistic that Malaysians are still inclined to participate in gaming despite the recent Omicron wave. Like Las Vegas Strip GGR, gross jackpot sales by NFOs continue to trend strongly