The Wednesday offer of U.S.-dollar billionaire Lim Kok Thay, chairman of casino operator Genting Malaysia Bhd, to take a 20 percent cut on his cash compensation would make little practical difference to the business performance of the firm, said a note that day from Maybank Investment Bank Bhd.
Genting Malaysia runs Resorts World Genting, Malaysia’s only licensed casino resort, as well as casinos in the United States, the Bahamas, the United Kingdom and Egypt.
A memo from analyst Samuel Yin Shao Yang said, giving Mr Lim’s 2018 remuneration as a theoretical example: “If he were to take a 20 percent pay cut on his 2018 cash compensation (excluding employee stock options), Genting Malaysia will save MYR12.4 million [US$3 million].”
“Either way, the cost savings to Genting Malaysia will be less than 1 percent of our financial-year 2019 core net profit estimate,” he added.
“As much as Tan Sri’s move sits well with the investment community, it is unlikely to move the hypothetical ‘needle’,” added the Maybank analyst, referring to Mr Lim.
Chinese-language media reports indicated on Wednesday that Mr Lim’s offer was in the light of challenging trading conditions linked to taxation issues in Malaysia.
In November last year, the Malaysian government said Resorts World Genting’s casino licence fee would be increased from MYR120 million to MYR150 million per year, while the casino duty rate on operations in that country was being raised to 35 percent from 25 percent of gross gaming revenue (GGR). Gaming machine duties were to be increased from 20 percent to 30 percent on gross collection.
Maybank’s Mr Yin said in his Wednesday note that Mr Lim’s offer to slash his compensation was in order to “mitigate the impact of the 10 percentage point casino tax rate hike”.
Mr Yin added: “In 2018, Tan Sri was paid MYR93.5 million (MYR31.3 million in employee stock options). If he were to take a 20 percent pay cut on MYR93.5 million, Genting Malaysia will save MYR18.7 million.”
Genting Malaysia has been involved recently in a row about tax incentives for the Genting Integrated Tourism Plan – a multi-phase revamp of Resorts World Genting. Some analysts have said it might act as a drag on the potential for the revamp to improve the firm’s balance sheet.
Late last month Genting Malaysia said first-quarter profit had fallen 25.1 percent on higher revenue but also some expenses that nearly doubled year-on-year.
The firm said in a press release at the time, that the results had been “impacted by a provision for contract termination related costs of MYR198.3 million in relation to the outdoor theme park at Resorts World Genting”.
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"People are still pretty reserved in their [gaming] spending. And what the [junket] sector faces now is that the collection of [gaming] debt is difficult"
Kwok Chi Chung
President of the Macau Association of Gaming and Entertainment Promoters