Broker: UOB Kay Hian
Date of Report: 6 June 2025

Malaysia Gaming Sector 2025: Depressed Valuations, Tempting Yields, and the Search for Catalysts

Sector Overview: Defensive Appeal Amid Structural De-Rating

The Malaysian gaming sector, encompassing casinos, number forecast operators (NFOs), and gaming equipment suppliers, started 2025 with mixed first-quarter results. While consumption trends and tourist arrivals remain stable and on an upward trajectory, the sector faces a lack of immediate catalysts to drive outperformance. Despite this, valuations are notably depressed and dividend yields are highly attractive, making the sector an appealing option for long-term, yield-focused investors.
Key highlights:

• 1Q25 results reflect stable to improving consumer and tourism trends, albeit with company-specific variances.
• Gaming stocks trade at 1-2 standard deviations below historical mean valuations.
• Dividend yields for 2025-2026 are projected in the lush 4-10% range.
• Sector recommendation is downgraded to MARKET WEIGHT due to the absence of strong, near-term catalysts. However, BUY ratings are maintained for all covered stocks owing to attractive valuation and yield metrics.

Tourism and Consumption: Driving Steady Growth

Malaysia’s consumer spending grew 5.3% year-over-year in 1Q25, outpacing the previous year’s 4.7% growth. The upswing is primarily attributed to the rebound in tourism, supported by government initiatives such as visa liberalization for Chinese visitors and the upcoming Visit Malaysia 2026 campaign. Both the casino and NFO subsectors report robust business volumes through May and June, with NFO ticket sales now exceeding 90% of pre-pandemic levels.

Valuation and Yield: Compelling Risk-Reward for Long-Term Investors

• Gaming stocks are trading at -1SD to -2SD below their long-term average valuations.
• The sector offers dividend yields of 4-10% for 2025-2026.
• Restoration to pre-pandemic valuation multiples is unlikely soon, given persistent political risk and subdued sentiment, but current pricing reflects overly bearish scenarios.

Peer Comparison Table

Tourism Malaysia: International Arrivals to Surpass Pre-Pandemic Levels

Tourism Malaysia aims to attract 45 million international visitors for the Visit Malaysia 2026 campaign, leveraging incentives for charter flights, visa liberalization, and enhanced overseas promotion. The casino subsector, particularly Genting Malaysia, stands as a direct beneficiary of this influx, which is expected to drive earnings growth through 2H25 and into 2026.

Casino Subsector Analysis

Genting Malaysia (GENM): Heavily Discounted, Awaiting US Catalysts

GENM’s share price has suffered a decade-long slide, down 19% year-to-date and far from its 2017 peak of RM6. The fall is linked to a series of setbacks, including the termination of the 20th Century Fox World theme park, increased gaming duties, the controversial Empire Resort acquisition, the pandemic, exclusion from the KLCI Index, and dividend reductions.
Key re-rating catalysts are expected from GENM’s US operations:

• Resorts World New York City (RWNYC) is tendering for a lucrative downstate casino license, with a decision expected by end-2025.
• Potential revival of the Mashpee tribe’s First Light Casino in Massachusetts could trigger a write-back of RM1.8 billion in promissory notes.
• Possible sale of Miami land, with proceeds estimated up to US\$1.5 billion.
• Resolution of ongoing litigation involving RAV Bahamas.

GENM is forecast to maintain a dividend per share (DPS) of 11 sen in 2025, balanced by healthy cash flows and modest capex requirements.

Genting Berhad (GENT): Poised for Sequential Earnings Growth

GENT expects improved results throughout 2025 as its key subsidiaries, GENM and Genting Singapore, continue to recover. The anticipated surge in international tourist arrivals, especially from China, and increased regional flight capacity remain pivotal catalysts. Resorts World Las Vegas is set to benefit from major convention events and the ongoing popularity of the Las Vegas Formula 1 race.
GENT is expected to maintain a 10 sen DPS in 2025, supported by robust cash flows.

NFO Subsector: Recovery and Dividend Resilience

Magnum and Sports Toto (SPTOTO): Lush Yields and Recovery Potential

After years of pandemic and political headwinds, Magnum and SPTOTO are showing strong net profit growth (54-94% yoy in 1Q25), buoyed by jackpot sales and lower payouts. NFO sales are projected to rebound to 95-100% of pre-pandemic levels in 2Q25-2H25, up from 90-92% in 1Q25, as enforcement against illegal operators intensifies and punter behavior shifts towards legal options.
Both companies are forecast to deliver dividend yields of 6-9% for 2025-2026, with payout ratios of 70-80% likely to be sustained as earnings normalize.

Magnum: U-Mobile Stake Monetization as a Key Catalyst

Magnum’s 6.3% stake in U-Mobile, which is considering an IPO at a potential RM10 billion valuation, could unlock around RM630 million or RM0.44 per share—about 35% of Magnum’s current market cap. Proceeds could be used for special dividends, shares in specie, or debt reduction (current borrowings: RM724m; cash: RM218m), potentially saving RM36-39m per year in finance costs and boosting net profit by 14-15% in 2025-26.

Small and Mid-Cap Highlight: RGB’s ASEAN Growth Opportunity

RGB: Riding the ASEAN Gaming Boom

RGB, a supplier of gaming equipment, faces a temporary setback with a 46% yoy drop in 1Q25 core profit due to delayed orders in the Philippines from the mid-term election. However, the company remains well-positioned to benefit from the region’s expanding integrated resort (IR) pipeline, regulatory support for higher slots quotas, and remote gaming policies.
While a softening in sales and marketing (SSM) is expected in 2025 after a record 2024, SSM sales should remain robust (3,800-4,000 slot machines versus ~4,500 in 2024). Growth drivers include:

• Phase 2 of PAGCOR’s modernization program
• Annual organic replacement of 2,500-2,600 slot machines
• Opening of 1-2 new small-scale gaming venues in the Philippines

RGB’s valuation has corrected by 25% year-to-date and now trades at an attractive 5.6x 2025F P/E (4.2x ex-cash), with a net cash position of RM122.6 million (~26% of market cap) and a forecast 50% dividend payout, implying a 9-10% yield in 2025-26.

Conclusion: Sector Remains a Yield Play with Selective Catalysts

The Malaysian gaming sector in 2025 offers investors an unusual combination of depressed valuations and rich dividend yields, even as immediate catalysts are scarce. The sector’s defensive nature and strong cash-flow generation underpin the investment case, especially for those with a mid- to long-term horizon. While the sector as a whole is rated MARKET WEIGHT, all leading stocks—Genting Malaysia, Genting Berhad, Magnum, Sports Toto, and RGB—are rated BUY based on their individual merits of valuation, yield, and exposure to structural trends.

Key Takeaways for Investors

• Expect stable to improving earnings as tourism and consumer spending recover.
• Dividend yields of 4-10% offer strong defensive appeal.
• Major upside catalysts depend on US developments for GENM and potential corporate actions for Magnum.
• RGB’s regional growth story remains intact despite temporary headwinds in the Philippines.
• Valuations across the sector are deeply discounted, providing a cushion for long-term investors.