With taxes set to increase for Genting Malaysia starting the next year, financial research firm UOB Kay Hian Research forecasts that the tax on VIP operations will go up to 20% from the current 10% rate.
This is significantly smaller than the 35% rate similar to that announced for the casino’s gross gaming income from 2019 onwards.
Inside Asian Gaming reported on the note released by UOB Kay Hian, that said, “Given that the negative impact from the gaming tax hike has been fairly priced in, and with the lower-than-initially expected VIP gaming tax serving as a pleasant surprise, investors may now refocus on Genting Group’s catalysts in 2019.”
Earlier this month, with Malaysian Finance Minister Lim Guan Eng announcing the income tax hike from 25% to 35%, and increase of Genting Malaysia’s yearly license fee from MYR120 million ($28.7 million) to MYR150 million ($35.9 million), shares of the firm fell approximately 20%, from MYR4.5 ($1.08) per share to MYR3.6 ($0.86), where it has been hovering since.
Genting Malaysia’s Highlands casino is the only physical casino in Malaysia, where the industry is severely restricted.
UOB Kay Hian came up with its analysis based on channel checks, and noted that the Genting Group had originally predicted an increase from 10% to 20% for the VIP segment.
Genting Malaysia had reacted to the fee and rate increase announcements, saying it was “assessing the full implications of the additional taxes and will take the appropriate next course of action which includes a review of its marketing expenditure and cost structure to mitigate the impact of the tax increases.” No specific changes have been announced since.
Last month, both Maybank Kim Eng Research and Nomura International said that the increases, which at the time had not been specified, would not have a serious effect on Genting Malaysia, given the company’s financial condition and prospects.
For the second quarter of this year, the company reported a profit of MYR378.3 million ($91.6 million), 117% higher than the MYR174 million ($42.1 million) reported for the same period last year.
Revenue was MYR2.42 billion ($586 million), 5.7% higher year on year. MYR1.59 billion ($385 million) of this came from its leisure and hospitality businesses in the country.
