Non-gaming facilities seen driving up visitations for Genting Malaysia

TheEdge Fri, Jul 19, 2019 11:11am - 4 years View Original


Genting Malaysia Bhd
(July 18, RM3.37)
Maintain hold with a target price (TP) of RM3.40:
We believe the biggest competition threats to Genting Malaysia Bhd’s mass and premium-mass segments are from casinos in Cambodia, the Philippines and Vietnam, which are expanding their capacity significantly. Myanmar also passed a new law in May to legalise gaming, leaving Thailand and Brunei as the only two countries within Asean in which casinos are still illegal.

Malaysia has previously benefitted as one of the few countries in the region that have a legal large-scale casino. However, more countries are starting to embrace gaming as another source of revenue.

We believe it would be challenging for Genting Malaysia to match the rebates and complimentary perks offered by regional casinos in lower-tax-rate jurisdictions as it would need to sacrifice a significant margin to do so, given that gaming taxes are charged on gross gaming revenue.

Minor tweaks of complimentary perks are still largely acceptable to players in the mass and premium-mass segments. However, a reduction in such rebates is unlikely to be well accepted by VIP players as the rebates are based on a predetermined percentage of the overall bet of a player.

We reaffirm our “hold” rating and 12-month sum-of-parts-based TP of RM3.40 as we continue to believe the hike in gaming tax would limit Genting Malaysia’s options in competing with casinos around the region. Although new non-gaming facilities have helped drive up overall visitations in the mass segment, the VIP-segment volume has declined significantly after the change in rebates. — Affin Hwang Capital, July 18

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