Broker: UOB Kay Hian
Date of Report: 15 July 2025

Malaysia Gaming Sector 2025 Outlook: Rebound, Resilience, and Dividend Yields Drive Investment Appeal

Introduction: Defensive Outperformance Amid Market Volatility

The Malaysian gaming sector is staging a robust comeback in 2H25, outpacing the broader FBMKLCI index despite challenging macroeconomic headwinds and volatile US trade policies. Key catalysts such as strong tourism growth, attractive dividend yields, and improving domestic consumption are supporting this outperformance. UOB Kay Hian maintains a MARKET WEIGHT stance on the sector, with selective BUY recommendations for stocks offering near-term event catalysts and compelling valuations.

Sector Overview: Resilience, Valuation, and Yield Compression Narrative

• The gaming sector advanced 4.8% in 2H25, outperforming the FBMKLCI’s 0.3% gain.
• Key outperformers include SPTOTO (+14.6%), Magnum (+4.7%), Genting Malaysia (GENM, +4.4%), Genting Berhad (GENT, +1.3%), while RGB International held steady.
• This resilience is attributed to previously depressed valuations and lush dividend yields, which remain attractive amid a low interest rate environment.
• Tourism is booming, with international arrivals up 10.5% year-on-year in the first four months of 2025. Notably, visitors from Greater China surged 28.8%, exceeding pre-pandemic levels by 12.5% and accounting for 14.6% of total arrivals.

Investment Thesis: Valuations and Dividends Remain Appealing

• Gaming stocks continue to trade at -1SD to -1.5SD below mean valuations, providing a comfortable entry point for mid- to long-term investors.
• Dividend yields for 2025-26 are projected at an appealing 4-10%.
• Yield compression remains a key narrative, potentially providing modest capital upside.

Essential Catalysts and Sector Highlights

• OPR Cut Boosts Consumption: The recent 25bp reduction in the Overnight Policy Rate to 2.75% is expected to lift discretionary spending, benefiting both casino and NFO (Number Forecast Operator) segments.
• Tourism Malaysia Targets Record Arrivals: The Visit Malaysia 2026 campaign aims for 45 million international visitors. The extension of the Malaysia-China visa-free period and increased promotional efforts are anticipated to boost casino patronage.
• Dividend Payouts Supported by Cash Flows: Companies are forecasted to pay generous dividends, underpinned by resilient cashflows and manageable capex requirements.

Peer Comparison Table

Casino Subsector: Genting Malaysia (GENM) and Genting Berhad (GENT)

• GENM: Target price raised to RM2.35, reflecting improved investor sentiment and emerging US catalysts. The US District Court dismissed a US\$600m lawsuit against Genting America, removing a legal overhang. Additionally, Resorts World New York City submitted a US\$5.5b bid for a commercial casino licence; if successful, this could boost annual EBITDA by over US\$106m.
• GENT: Target price increased to RM3.86. Earnings are expected to strengthen for the remainder of 2025 as international tourist arrivals climb and both GENM and Genting Singapore restore pre-pandemic earnings momentum. Resorts World Las Vegas is set to benefit from increased conventions and the Formula 1 event.
• Thailand Casino Risk Reduced: Thailand’s withdrawal of its casino legalisation plan benefits GENM and GENS by reducing regional competition and freeing up capital for dividends or debt reduction.

Number Forecast Operator (NFO) Subsector: Magnum and Sports Toto (SPTOTO)

• Magnum: BUY maintained with a target price of RM1.56. Ticket sales are rebounding to 90-100% of pre-pandemic levels. A potential tailwind exists from the possible monetisation of its 6.3% U-Mobile stake, which could yield up to RM630m or RM0.44/share—about 33% of current market cap. This could result in special dividends or a significant reduction in borrowings, adding RM25m-26m (14-15%) to 2025-26 net profit forecasts.
• SPTOTO: HOLD maintained with a target price of RM1.44. SPTOTO offers a solid forward yield of 5.7%. Both NFOs could deliver 6-9% yields for 2025-26, with dividend payouts likely sustained at 70-80% as earnings recover. Key re-rating catalysts could include the legalisation of online operations.
• Authorities are intensifying efforts to curb illegal operators, potentially shifting punters back to legal channels.

Small-Mid Cap Highlight: RGB Berhad

• BUY maintained with a target price of RM0.43, implying 8x 2025F PE (4.2x ex-cash PE). RGB is strategically positioned to benefit from the rapid expansion of the gaming industry in ASEAN, especially in the Philippines, where new integrated resorts and supportive legislation drive demand.
• 2025 SSM (Sales and Marketing) sales may soften due to macroeconomic headwinds, but are expected to remain healthy at 3,800-4,000 slot machines, supported by PACGOR’s modernisation, organic replacement, and new gaming operations.
• Despite a 26% year-to-date share price retracement, RGB trades at an attractive 5.6x 2025F PE with a net cash position of RM122.6m (26% of market cap). Forecasted 50% dividend payout implies a robust 9-10% yield for 2025-26.

Investor Takeaways: Sector Summary and Market Positioning

• Maintain MARKET WEIGHT on the overall sector, reflecting a balanced outlook between the defensive characteristics of gaming stocks and a lack of major new catalysts after the recent run-up.
• Top picks are Genting Malaysia, Genting Berhad, Magnum, and RGB, each offering different avenues of growth, recovery, or yield.
• The sector remains a compelling option for yield-seeking investors and those looking for defensive positioning amid ongoing market uncertainty.

Key Financial Performance and Yield Trends

• Dividend yields in the gaming sector are forecasted at 4-10% for 2025-26, with GENT and GENM maintaining their respective 10sen and 11sen per share dividends.
• Gaming stocks’ EBITDA and ticket sales are steadily recovering, with NFOs expected to reach 90-100% of pre-pandemic sales in 2H25.

Conclusion: Selective Positivity in Malaysian Gaming

The Malaysian gaming sector is reasserting its defensive appeal and dividend strength in 2025, with tourism recovery and yield compression providing key support. While broad sector catalysts are limited, selective stocks—backed by event-driven upside, robust cashflows, and discounted valuations—offer investors attractive opportunities for both yield and growth in the second half of 2025 and beyond.