Maybank reduces Genting Malaysia profitability forecasts due to two-point service tax increase

The operator of Resorts World Genting, the only casino complex with a license in Malaysia, Genting Malaysia Bhd, has had its profitability forecasts for 2024 and 2025 reduced by 4% and 5%, respectively, by Maybank Investment Bank Bhd. This modification results from a two-point increase in the service tax in Malaysia.

The amended forecast by Maybank projects core net profit to reach MYR913 million (US$191.7 million) in 2024 and MYR1.01 billion in 2025. Analyst Samuel Yin Shao Yang claims that while Genting Malaysia’s management has several options to mitigate the effect, Resorts World Genting would essentially be paying a higher “”gaming tax”” as a result of the service tax rate increase.

These options include increasing hotel room costs, delaying pay increases, cutting direct VIP rebate rates, hiking junket commission rates, and better-controlling water and energy consumption.

Getting a complete casino license in New York City and resolving its interest in the postponed Mashpee Wampanoag tribal gaming project proposal in Massachusetts, USA, are two other potential triggers for Genting Malaysia investors, according to Yin.

The service tax rate in Malaysia will increase from 6% to 8% on March 1 of the following year, under the budget proposal announced on October 13th. The service tax is now paid by Resorts World Genting on behalf of its clients.

The budget also designated 2026 as the “”Visit Malaysia Year,”” with the aim of bringing in 26.1 million foreign tourists and spending MYR97.6 billion on travel and tourism-related expenses. The growth of tourism will get MYR350 million in 2024, and travelers who meet the requirements will be granted visa-on-arrival clearance. It’s possible that other forms of conditional admission into the country, such social visit permits and multiple-entry visas, will also be easier to get.

These actions, according to Maybank, should help reduce the 15% difference in visitor arrivals at Resorts World Genting now compared to 2019. This gap will be closed by an increase in tourists from significant source markets including China and India.

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Original article by: GGRAsia