Genting Malaysia price down on tax hike news

Genting Malaysia price down on tax hike news

This past Monday, Genting Malaysia saw its largest single-day price drop ever. The company’s share price was down as much as 30%, Genting Malaysia price down on tax hike newsmarking the biggest fall since the company’s stock was first listed in 1989. The fall was driven by concern over an announcement by the Malaysian government that it is planning on increasing the annual fees and duties on gross revenue.

Last Friday, Malaysia’s Finance Minister, Lim Guan Eng, gave a budget speech in which he indicated that the annual casino license fees would increase to $36 million, up from the current $28.8 million. He also said that gross gaming revenue would be taxed at a rate of 35%, 10% more than the current rate.

The news pushed Genting’s shares down considerably. The company’s parent, Genting Bhd, also saw its shares decrease, dropping at one point by 12%. By the time trading ended on Monday, Genting Malaysia’s price was 20.48% lower than the previous day, stuck at $0.865. The Bursa Malaysia exchange was closed yesterday, which might be a good thing.

The increases announced by Lim were expected to bring bad news for Genting’s shares. Japanese brokerage firm Nomura indicated that the tax increase had been included in forecasts, but that the market had expected an increase of only 5%. The speculation over the new tax rates had already taken its toll on Genting, resulting in the company’s stock price dropping by about 9% since the beginning of October.

Nomura added that it was cutting its Genting rating from “buy” and added that it would also reduce its target share price. It was previously listed at $1.55, but now sits at $1.00.

Last month, brokers indicated that any tax increase would not be a problem for Genting. However, it appears as though investors were a little more skittish than many had anticipated.

Genting Malaysia operates Malaysia’s Resorts World Genting, as well as other casinos in the UK, the Bahamas and the U.S. In reporting its second-quarter financial results this past August, the company said that its profits had increased 104% year-on-year, but Nomura indicated that the company had seen a decline in VIP gaming volume of 21% in the same period.