Thursday, August 8, 2013

Alliance not ruling out hike in tax on gaming sector


Posted on 7 August 2013 - 05:36am
sunbiz@thesundaily.com 

PETALING JAYA (Aug 7, 2013): The increasing pressure for the federal government to address a high budget deficit and high government debt levels may lead to potential increase in tax on gaming revenue as the government strives to widen its tax revenue base, said Alliance Research Sdn Bhd analyst Cheah King Yoong.

"Recalled the last time the government standardised the 25% casino duty for domestic casino operator, Genting Group, was back in 1998; while gaming tax and pool betting duty for number forecasting operators (NFOs) were raised to 8% in 1998 and 2010, respectively.

"As such, we do not discount the likelihood that the government could relook at raising these taxes for the domestic gaming players," he said in a report yesterday.

Cheah also raised concern that should the government introduces the goods and services tax (GST) at the upcoming Budget 2014 on Oct 25, 2013, it would either mean imposing a new layer of tax on the operations of domestic gaming players or serve as a partial replacement for the current tax charge that they are paying.

"Although we as well as investors are uncertain of the likelihood whether these measures will be implemented by the government, we believe that share price performances of domestic gaming players could be dragged by the rising market concern in the coming months, prior to budget announcement," he added.

Cheah also expects the potential gaming liberalisation in New York and Miami that would see new casino operations being set up, to be deferred to 2014 instead of this year.

"With the deferment in New York and Miami gaming liberalisation, Genting Malaysia Bhd (GENM) would lack re-rating catalyst in the near term, which has thus far placed heavy bets in these two states, with the gaming giant proposing an integrated resort business model in Miami.

"(And) although Genting Singapore PLC is optimistic that the gaming liberalisation in Japan could happen over the next 12 months period, it remains to be seen whether the authority will push through the long dragged gaming liberalisation proposal by this year as the liberalisation plan was proposed since 2010," said Cheah.

Upon considering the factors, he has downgraded the gaming sector to "neutral" from "overweight". He has also cut his recommendation for GENM to "neutral" from "buy" at RM4.40 with a RM4.53 target price, on limited upside potential for the stock following strong share price performance post the 13th general election.

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