Maybank Investment Bank Bhd is cutting by 4 percent and 5 percent respectively, its forecast for 2024 and 2025 earnings at Genting Malaysia Bhd, operator of Resorts World Genting (pictured), the only licensed casino complex in Malaysia. That is due to a 2 percentage point rise in service tax in that nation, it said.
The adjustment in forecast referred to core net profit, which the institution estimates at MYR913 million (US$191.7 million) for next year, and MYR1.01 billion for 2025.
“The increase in service tax rate… is effectively a ‘gaming tax’ hike for Resorts World Genting,” said analyst Samuel Yin Shao Yang in a Thursday memo.
Though he added that “remedies” were available to Genting Malaysia’s management.
The company could “cut junket commission rates or direct VIP rebates rates, raise hotel room rates, delay salary increments and ration water and energy consumption to moderate the impact of the service tax hike,” stated Mr Yin.
“Other catalysts” for Genting Malaysia investors, were if the group succeeded in “securing a full casino licence in New York City and writing back its Mashpee Wampanoag investment,” stated the analyst.
The latter was a reference to a long-standing and stalled tribal gaming project proposal in Massachusetts, in the United States.
Maybank noted that based on a Malaysian budget proposal tabled on October 13, the country’s service tax rate was – from March 1 next year – to be raised to 8 percent, from 6 percent currently.
Resorts World Genting “bears the service tax” on behalf of its gamblers, noted Mr Yin.
Maybank said the latest budget announcement – for financial year 2024 – had mentioned 2026 would be designated locally as “Visit Malaysia Year”, with a target for 26.1 million foreign tourists and MYR97.6-billion in tourism expenditure.
There would be MYR350 million for tourism-promotion during 2024, and availability of visa-on-arrival clearance for certain eligible travellers. Other forms of conditional entry to the country, such as social visit passes and multiple-entry visas, might be easier to obtain, according to the government announcement, said Maybank.
“We hope the current 15 percent shortfall in Resorts World Genting visitor arrivals relative to 2019 will be narrowed, with more tourists from major source markets like China and India,” stated the Maybank analyst.
