‘Tax hike to have negative bias’

KUALA LUMPUR: Any policy on the gaming sector in the upcoming 2019 Budget is likely to have negative bias.

In a research note, AllianceDBS Research said other than a statement by Finance Minister Lim Guan Eng that the number of special draws for number forecast operators (NFOs) would be reduced next year, it did also not discount the possibility that other measures, such as gaming tax hike, might be announced in the 2019 Budget to curb the gambling activities.

AllianceDBS said should the government decide to hike gaming-related tax in the upcoming budget, its sensitivity analysis showed that a one per cent increase in casino duty would lower Genting Bhd (GENT) and Genting Malaysia Bhd’s (GENM) forward earnings by about one and three per cent, respectively.

“On a positive note, the NFOs may attract buying interests if the authority strives to reduce the gambling activities in Malaysia by highlighting it during the budget to curb the illegal NFO activities.”

On the other hand, a one per cent rise in gaming tax/betting duty could reduce Berjaya Sports Toto and Magnum’s forward earnings by about seven and eight per cent, respectively, it added.

However, AllianceDBS is maintaining its “overweight” call on the sector, with GENT as its top pick.

“As the parent company of Genting Singapore and GENM, we believe GENT offers a cheaper exposure to both subsidiaries,” it said.