- Although the Barisan Nasional (BN) has retained power, we reckon that the risk of a hike in gaming tax is still prevalent.

- This is due to BN’s manifesto that might see a reduction in the country’s tax revenue but at the same time, government spending is expected to increase.

- As mentioned previously, we estimate that Genting Malaysia Bhd’s (GenM) net profit would decline 2% for a one-percentage point increase in the gaming tax rate.

- For simplicity’s sake, we have assumed that the gaming tax rate is 25%. Presently, the tax rate on mass market and slot wins is 25% while VIP wins is taxed at 10%.

- Since 1998, the gaming tax rate has not increased. Prior to 1998, the gaming tax rate system was on a progressive scale of 22% to 25%.

- We estimate that GenM recognised more than RM930mil in gaming tax and RM415mil in corporate tax in FY12. Over the past five years, we estimate that GenM paid RM6.8bil in gaming and corporate taxes in total.

- In another development, Dow Jones reported that Taiwan is a step closer towards having its first legal casino after the cabinet approved a draft version of the Gaming Act. The draft bill is based on rules adopted by Singapore.

- The proposed casino will be on Matsu Island, which is located close to China. The residents of Matsu Island have already voted in favour of the casino in a referendum in July.

- According to the report, Weidner Resorts has already proposed a US$2bil plan for the casino in Matsu Island.

- We do not believe GenM or Genting Singapore PLC would be interested in developing a casino on Matsu Island. GenM has a number of projects in the US while Genting Singapore has its eyes on Japan.

- There is a small likelihood that Genting Hong Kong PLC could be interested as it has cruise itineraries to Taiwan. However, Genting Hong Kong is busy with the listing of Travellers Group in the Philippines currently and the development of another casino in Manila.

Source: AmeSecurities