Genting Malaysia stock dropped as much as 30 percent on concern a bigger-than-expected casino tax hike in Friday’s budget will slice into earnings.
According to Bloomberg, the share price decline was the biggest for the Malaysian operator since it listed in 1989.
Finance Minister Lim Guan Eng said in his budget that annual fees for casino licenses will be increased to 150 million ringgit ($36 million) from 120 million ringgit. Duties on casino gross income will rise to 35 percent from 25 percent previously.
The tax hikes, which were double the level analysts had been expecting, triggered a series of rating downgrades.
“We believe the 10pp increase in gaming tax, along with other tax increases such as annual license fees, dealer licenses, etc, are extremely punitive, and diminish the investment appeal of the gaming sector,” Nomura analysts wrote in a note.
“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,” they said.
Nomura now expects earnings at Genting to decline in fiscal 2019 against earlier expectations for growth of 15 percent and has a reduce rating on the stock.
Genting had been enjoying strong visitation and revenue growth due to the attraction of new facilities after the multi-billion dollar revamp of its Resorts World Genting property. Nomura says sentiment is likely to now remain weak until after a theme park developed with 20th Century Fox opens next year.