Malaysian investment bank Maybank has estimated that last week’s decision by Genting Malaysia to withdraw its application for a Judicial Review into a Ministry of Finance amendment to the terms of tax incentives will result in a 9% reduction in earnings per share in FY19/FY20.
Genting Malaysia had been granted tax incentives by the MOF in December 2014 for its multi-billion dollar Genting Integrated Tourism Plan (GITP) redevelopment, only for authorities to amend the agreement in December 2017 to significantly prolong the utilization period of those tax allowances.
The casino operator responded by filing an application for Judicial Review of the MOF Decision with the Kuala Lumpur High Court in January of this year, which was granted, only to announce last week that it had withdrawn its application. No reason for the change of heart was given.
In a research note published Monday, Maybank Research noted that Genting Malaysia can now expect higher corporate tax rates in the near future, with Resorts World Genting’s tax rate rising from a previously expected rate of 12% to around 20%.
As a result, earnings per share estimates have been revised down by 9% per annum through 2019 and 2020. However, earnings per share estimates for 2021 have been revised up by 2% as “there will now likely still be GITP tax incentives to be utilized then.”
Maybank estimates Genting Malaysia will see a 2.7% rise in revenue to MYR10.19 billion (US$2.46 billion) in 2019, growing further to MYR10.53 billion in 2020. But net profit forecasts are heading in the other direction, falling from a realized profit of MYR2.02 billion (US$487.7 million) in 2018 to an estimated MYR1.25 billion (US$301.8 million) in 2019 and MYR1.35 billion in 2020.
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