In­crease in gam­ing taxes credit neg­a­tive for Gent­ing, says Moody’s

The Star Malaysia - StarBiz - - News -

PE­TAL­ING JAYA: The hike in taxes, fees and levies on the gam­ing in­dus­try, par­tic­u­larly the in­crease in casino du­ties of up to 35%, is credit neg­a­tive for Gent­ing Bhd, said Moody’s In­vestors Ser­vice.

The in­crease in du­ties, which was an­nounced in Bud­get 2019, would erode Gent­ing’s earn­ings con­tri­bu­tion from its Malaysian leisure and hos­pi­tal­ity seg­ment, con­se­quently weak­en­ing the group’s lever­age, it said in a com­men­tary.

Gent­ing, which has a BAA1 sta­ble rat­ing, cur­rently pays casino du­ties of up to 25% on gam­ing rev­enue.

“We ex­pect Gent­ing’s earn­ings be­fore in­ter­est, taxes, de­pre­ci­a­tion and amor­ti­sa­tion (EBITDA) to de­cline by around RM650mil in 2019 un­der a stressed sce­nario, where casino du­ties of ad­di­tional 10% on gam­ing rev­enue starts from Jan 1, 2019.

“The de­cline will erode the likely ini­tial gains the group will achieve in 2019 fol­low­ing the com­ple­tion of its Gent­ing In­te­grated Tourism Plan (GITP) at Re­sorts World Gent­ing, Malaysia’s sole land-based casino,” said Moody’s.

The GITP, which com­menced in 2013, is a de­vel­op­ment that will en­hance Re­sorts World Gent­ing with ad­di­tional food and bev­er­age of­fer­ings as well as en­ter­tain­ment and re­tail ar­eas; a new in­door theme park; and the re­build­ing of its out­door theme park as a 20th Cen­tury Fox World theme park.

Ad­di­tion­ally, the rat­ing agency ex­pects Gent­ing’s credit met­rics to weaken as a re­sult of the duty hike, though it will re­main within its BAA1 rat­ing pa­ram­e­ters.

As mea­sured by debt/EBITDA, Gent­ing’s lever­age will likely in­crease to 3.8 times in 2019, from 3.5 times in 2018.

Mean­while, the group’s re­tained cash­flow/ debt will likely weaken to 12% from 13% over the same pe­riod.

“Although Gent­ing’s credit met­rics are ex­pected to re­main within their rat­ing pa­ram­e­ters of BAA1, there is lim­ited head­room to ac­com­mo­date an in­crease in debt un­til con­struc­tion of Re­sorts World Las Ve­gas com­pletes and the new in­te­grated re­sort starts con­tribut­ing to the group’s earn­ings,” said Moody’s.

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