Resorts World Genting (pictured), the only casino resort in Malaysia, is unlikely to face the threat of a smoking ban, despite a public policy applied elsewhere in the country, said a note from an investment analyst, quoting management at the property’s operator Genting Malaysia Bhd.
Maybank IB Research said that notwithstanding the headwind of a 6 percent goods and services tax (GST) imposed on consumers by the Malaysian government from April 1 – and covering casino gambling – the management at Resorts World Genting reported gaming business had been resilient in the second quarter.
“A smoking ban is unlikely,” said Samuel Yin Shao Yang of Maybank, in a note on Monday, following meetings with Genting Malaysia management.
“On recent efforts by the [Malaysian] government to ban smoking in restaurants, parks and rest stops, GEN Malaysia said it will not be extended to Resorts World Genting. There were two waves of smoking bans in the past, one in September 2004 and one in July 2010. In both cases, Resorts World Genting together with pubs and nightclubs were exempted,” added Mr Yin.
Investment analysts in Hong Kong have suggested that 15 percent could be shaved off Macau’s VIP gambling revenue and 10 percent off mass-market revenue, if a proposed total smoking ban in that city’s casinos is passed by legislators.
Mr Yin said that Resorts World Genting has so far been absorbing on behalf of customers the cost of the GST imposed on gambling. The brokerage estimates it will cost the casino resort’s management between MYR200 million (US$52.5 million) and MYR300 million per year in the first year.
“We were wary that the 6 percent GST will not only serve as an additional tax… but reduce gaming budgets as well,” said Maybank, referring to the tax burden faced generally by consumers for other types of purchase because of GST.
The note added that a 423-room hotel associated with a theme park at Resorts World Genting – and that closed in February 2014 for refurbishment – will reopen by the end of 2016.
“At this point in time, GEN Malaysia is unsure whether it will be themed after the nearby 20th Century Fox World or not,” said the research house, referring to a branded theme park that is due to open at the resort in 2016.
Maybank said that the MYR4-billion Phase 1 of the Genting Integrated Tourism Plan – a revamp scheme for the casino resort – “should be fully completed by end-2016”. It will include the 20th Century Fox World theme park, and a new casino called Sky Plaza aimed at so-called premium mass gamblers (those making high minimum bets in cash).
Genting Malaysia also operates casinos in the United Kingdom, the United States, and the Bahamas.
Maybank currently estimates full year 2015 revenue for the group will rise 8.5 percent to MYR8.93 billion, from nearly MYR8.23 billion a year earlier. It thinks full-year core net profit will rise 3.7 percent to MYR1.41 billion, from nearly MYR1.36 billion in 2014; and tips core earnings per share to increase 3.5 percent year-on year, to MYR0.248.
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"Genting was always facing an uphill battle to displace an existing concessionaire"
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