Malaysia’s gaming sector has been downgraded to neutral from overweight by financial firm Affin Hwang Capital, which pointed to “relatively weak” corporate results “due to declining visitor arrivals and poor luck factor”. But the focus for 2015 is mainly centred on Genting Bhd’s progress in winning new casino licences, Affin Hwang said in its latest report on the gaming sector.
“We are disappointed that Genting Malaysia’s bid for a casino licence in upstate New York did not materialise. We believe factors other than potential tax revenue may have influenced the bid outcome,” said analyst Lim Tee Yang.
New York’s Gaming Facility Location Board on December 17 recommended three projects for upstate casino licences, leaving out two proposals from Genting Malaysia.
“It remains to be seen where Genting Malaysia may make its next move in the U.S., but we believe Genting Malaysia would need to be selective given rising competition from new casinos amid moderating industry growth. At this juncture, we are not aware of potential new casino licences to be issued in the U.S,” the note said.
Genting Malaysia is awaiting approval to start construction of its Resorts World Las Vegas in Nevada.
Looking east, another of Genting’s subsidiaries, Genting Singapore Plc, “is making good progress in [South] Korea”, but the recently concluded snap elections in Japan might not translate into an immediate revival of the casino bill, the analyst wrote.
In South Korea, Resorts World Jeju could possibly see the light of day in the first half of 2015.
“However, the casino bill in Japan may have to wait as we believe [prime minister Shinzo] Abe may use the re-election victory to drag Japan out of deflation,” said the note. Genting Singapore has set up several wholly-owned subsidiaries in Japan in the likelihood that the country will legalise casino gaming.
Another headwind for Genting Malaysia and the country’s gaming sector is the implementation of the 6 percent Goods and Services Tax (GST) due in April.
“The implementation of the GST is negative for Genting Malaysia, as we understand that the casino will absorb the tax,” said Mr Lim.
“Tactically, the sector could however still benefit from a return of capital flows as the gaming sector is seen as generally defensive and is a foreign investor favourite,” he added.
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“The opening of NagaWorld is aligned to the government’s plan to gradually reopen the economy”
Chairman of NagaCorp, which operates the NagaWorld casino resort in the Cambodian capital Phnom Penh