The long-standing reputation of Genting Singapore and Genting Malaysia as ASEAN’s market leaders is set to come to an end, with the rapid growth of the Philippines and Cambodia marking them as the region’s top gaming destinations.
The inevitable ceding of ASEAN market share is highlighted in a research note from JP Morgan which points to tougher operating conditions in Singapore and Malaysia versus a less restrictive regulatory landscape, higher incremental supply with lower non-gaming investment, significant cost advantages and increasing connectivity to China enjoyed by their rivals.
“For the last 25 years, ASEAN investors have viewed the Genting family of stocks as preeminent gaming exposure,” the investment bank said.
“Now, we see demand dynamics in the region moving against the group. In particular, we see 2019 marking an inflection as Genting home markets Singapore and Malaysia cede their position as the largest ASEAN gambling locations to the Philippines and Cambodia.”
Of particular concern to analysts are recent increases in Singapore’s entry levy and gaming tax, while Genting Malaysia faces a tax hike of its own and a delay to its Fox theme park amid litigation involving its US partners.
The Philippines and Cambodia, meanwhile are looking at 2.4x growth between 2014 to 2019 with supply and demand continuing to grow at a faster pace than any of their regional counterparts.
“We think Genting Singapore and Genting Malaysia stand at a disadvantage, and market share loss to regional competition will accelerate over the next few years,” JP Morgan said.
“We see access and liquidity as primary sector drivers, placing Singapore and Malaysia at a disadvantage versus competition.”
The analysts provided an Underweight rating on both stocks with potential downside of 11% to 15% on shares in the coming years.
However, they said parent company Genting Group provides far greater opportunity due to upside from the potential monetization of the Resorts World Las Vegas and distributed risks thanks to its Plantation and Oil and Power assets.