Stiff competition hurting Genting Malaysia’s VIP business

The weak VIP business recorded by Resorts World Genting, Genting Malaysia Bhd’s hospitality business, is due to stiff competition, say analysts.

TA Securities Holdings Bhd, in a recent report, said this was especially true this year as the group was mulling over a costrationalisation programme that might include cutting junket’s commissions to mitigate the impact of an additional 10 per cent gaming tax.

Resorts World recorded a contraction in VIP business by 10 per cent while non-VIP business rose four per cent in the fourth quarter of last year.

While there has been no clarity on the tax incentive dispute with the Finance Ministry, TA Securities assumes Genting Malaysia’s effective tax rate to be at 15 per cent for financial year 2019-2021.

The ministry granted tax incentives for Genting Integrated Tourism Plan (GITP) in December 2014, which entitled Genting Malaysia to claim for income tax exemption equivalent to 100 per cent of qualifying capital expenditure incurred in 10 years.

In December 2017, the ministry decided to amend the tax incentive approval, which significantly prolonged the utilisation period of the tax allowances.

Subsequently, in January, the high court granted Genting Malaysia leave to commence judicial review proceedings against the ministry’s decision.