RHB Equity 360° (Gaming, Digi, KNM; Technical: Jaks Resources) - 08/04/2010

Top Story : Gaming – New opportunities from further liberalisation of policies? Overweight
Sector Update
♦ The NFO segment has undergone several new developments of late in the form of the allocation of 20 overlapping special draws for 2010, the approval of a new jackpot 4D game for Magnum and the approval of two higher minimum jackpot lotto replacement games for BToto. There is also potential for more industry changes in the form of the potential emergence of a new jackpot game for Tanjong and the possible approval of a sports betting licence, all of which has intensified industry hopes that the government is becoming more liberal in its gaming policies.
♦ We believe a sports betting licence may not necessarily be a good thing, depending on how it is implemented. This is due to four main issues. Firstly, the issue of the traditionally high prize payout ratios involved; secondly, the issue of gaming taxes to be borne; thirdly, the issue of agent commissions to be paid; and fourthly, the issue of implementation, as sports betting is far more complicated than normal 4D or
lotto betting.
♦ On the whole, we are positive on any potential liberalisation of the NFO industry, given that this would help enlarge the NFO revenue pie by taking market share from the illegals. If these liberalisation measures are taken, the next application to the government from NFOs would probably be in the form of outlet expansion,
given that the government’s stance on this has not changed for many years already. However, we would not hold out too much hope on that happening in the near future, given the political scenario in Malaysia. Currently, we project the NFO industry segment growth at 3.1% for 2010 and 1.6-1.7% for 2011-2012 (from 2.1% in CY2009).
♦ We have tweaked our forecasts for BToto slightly, after fine-tuning some parameters, resulting in a revision of -2% for FY04/10, +0.7% for FY04/11 and +1.8% for FY04/12. Maintain Overweight on sector. No change to the recommendations of Outperform for BToto (FV = RM4.95), Genting (FV = RM8.95) and Genting Singapore (FV = S$1.35); and Market Perform for Genting Malaysia (FV = RM2.90). Note that we have raised our fair value for Genting to RM8.95 (from RM8.90) to impute the recently updated target price for Genting Plantations of RM6.65 (from RM5.85).

RHB Equity 360°(Gaming, Digi, KNM; Technical: Jaks Resources)-08/04/2010