Genting Malaysia said it was reviewing marketing expenses and its cost structure after the government hiked casino taxes and duties in its annual budget, provoking the biggest one-day share price drop on record for the company.
In a filing with Bursa Malaysia, Genting said the increase in casino duties represents a 10 percentage point increase over existing rates. The license fee goes from RM120 million to RM150 million a year, with the amendments taking effect from Jan. 1 next year.
“GENM is assessing the full implications of the additional taxes and will take the appropriate next course of action which includes a review of its marketing expenditure and cost structure to mitigate the impact of the tax increases,” it said.
Malaysia’s monopoly casino operator had just begun to see the benefits from a multi-billion dollar revamp of its Resorts World Genting property, which includes the addition of new hotels, casino space and ultimately a theme park with 20th Century Fox.
The company had said it planned to step up its digital marketing efforts in regional markets to improve customer reach and drive visitation to the resort.
Analysts said they now believe the tax and fee increases will eat into the expected additional earnings from the upgrade.
“We estimate a MYR600-700mn impact to EBITDA / net income for FY9F-20F, which would offset a big chunk of the earnings growth expected from Genting’s substantial capex into new capacity over the past five years,” Nomura analysts said in a note.