Casino operator Genting Malaysia Bhd recorded a year-on-year decline of 59.8 percent in net profit for the first quarter of 2016, the firm announced on Tuesday.
Genting Malaysia said net profit for the period – which stood at MYR144.1 million (US$35.1 million) – was negatively affected by foreign exchange losses of MYR140.4 million.
The Malaysia-listed firm reported total group revenue of MYR2.21 billion for the first three months of 2016, up by 5.8 percent compared to the same quarter last year.
“Whilst the operational performance of the group grew this quarter, the strengthening of the Malaysian ringgit against the U.S. dollar resulted in significant foreign exchange losses on the group’s U.S.-dollar denominated assets,” Genting Malaysia said in a filing to Bursa Malaysia.
It added: “This, along with higher depreciation and amortisation charges, led to the drop in the group’s net profit.”
Genting Malaysia’s adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 27.0 percent year-to-year to MYR444.3 million.
Genting Malaysia runs Resorts World Genting (pictured in a file photo), Malaysia’s only casino resort, and operates casinos in the United States, the Bahamas and the United Kingdom. Last month, the company confirmed in a filing that it would be managing the casino at a resort being developed by a Native American tribe in Massachusetts in the U.S.
Judged market by market, Genting Malaysia achieved a higher volume of business in Malaysia during the first three months of 2016 compared to the same quarter last year. But the firm reported lower revenue in Malaysia – MYR1.31 billion, down by 6.3 percent in year-on-year terms – due to a lower hold percentage in the premium player business and the impact of a new Goods and Services Tax (GST).
Since April 1, 2015, consumption of goods and services in Malaysia has been subject to a GST at 6 percent. According to some investment analysts, GST on goods and services at Resorts World Genting is levied at an effective rate of 4.25 percent, rather than the national rate of 6 percent, because Genting Malaysia is allowed to offset some of the GST liability against its gaming tax liability.
First quarter revenue – measured in Malaysian ringgit – was up by almost 49 percent to MYR528.9 million in the firm’s U.K. operations. In the U.S. and the Bahamas, Getting Malaysia reported revenue equivalent to MYR350.4 million, representing an increase of 11.7 percent compared to the prior-year period.
Near term caution
Looking ahead, Genting Malaysia stated “the regional gaming market is expected to face continuing uncertainties surrounding the Asian premium players business”. The firm stated it maintained a “cautious stance on the near term outlook of the leisure and hospitality industry, but continue[d] to be positive in the longer term.”
In Malaysia, the firm said it would continue implementing its Genting Integrated Tourism Plan, which aims to upgrade the Resorts World Genting complex. The company said new attractions and facilities included in the plan would begin opening “from the second half of 2016”.
Genting Malaysia in February announced that it would be doubling the investment for the Resorts World Genting upgrade and expansion. The total capital investment is now estimated at MYR10.38 billion from the original MYR5 billion announced in 2013.
One of the main features of the Genting Integrated Tourism Plan is the addition of a 20th Century Fox theme park at Resorts World Genting. Japanese brokerage Nomura said in a March note that the completion of the park “will not happen before end-2017”.
In the U.K., Genting Malaysia says “plans are currently underway for both the group’s land-based casinos and [a] recently acquired online gaming operation to be streamlined as an integrated online, mobile and retail gaming business under the focus of a single management to provide a seamless multi-channel experience for its customers.”
In the Bahamas, the group expects the full opening of a new hotel in June, “along with new and more efficient modes of transportation” to the resort, will help to attract higher levels of both visitation and gaming activity to the property.
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”We are filled with gratitude and excitement as we approach our opening this June and hope to play a role in Las Vegas’s rebound after what has been an incredibly challenging year”
President of Resorts World Las Vegas