Malaysia – Troubled year for Genting Malaysia ends in first loss since 2000By Phil - 28 February 2019
With the cost of a failed partnership in Massachusetts coupled with falling revenues in Malaysia, the US, Bahamas, UK and Egypt weighing heavily on Genting Malaysia’s financial year, it was left to tax wrote-backs in Malaysia to save the operator’s year.
It was the first time the mountain operator had posted a loss since 2000. There was however an improvement in net profit in the fourth quarter due to the reversal of additional tax expense of RM166.2m incurred in the previous quarter..
“This reversal is following the High Court of Kuala Lumpur’s decision to grant the company’s application for leave to commence judicial review of the Ministry of Finance’s decision to amend terms of tax incentives previously granted to the company and a stay of the MoF decision, pending disposal of the judicial review application before the High Court,” the company said.
Fourth-quarter profit increased by 60.1 per cent to hit on falling revenue down by 1.5 per cent. The full year loss came in at MYR19.6m compared to a profit of MYR1.16bn a year earlier.
The main reason for the loss, the operator said, was the cost of the ‘impairment loss of MYR1.83bn on the group’s investment in the promissory notes issued by the Mashpee Wampanoag Tribe.’
The Mashpee deal cost Genting MYR1.77bn ($427.5m) in promissory notes, which it lost when the Department of Interior ruled that the Mashpee Wampanoag Tribe would not be allowed to build on the disputed land in trust the planned location for its First Light Resort & Casino in Taunton, South of Boston.
Analysts highlighted that without the influx of MYR304.98 m from taxation write-ups the company’s fourth quarter would have fallen flat.
Samuel Yin Shao Yang, an analyst at Maybank IB Research, part of Maybank Investment Bank, said: “Earnings outperformed, but due to less taxes.”
Japanese brokerage Nomura added: “Net income was higher due to tax write-backs, because Genting Malaysia switched back to the old tax computation methodology after getting judicial review approval for tax incentives.”
Revenues at its flagship Resorts World in Malaysia dropped by one per cent to MYR1.70bn in the fourth quarter. Revenues in the UK and Egypt fell by 14 per cent to MYR426.6m.
The quarter was worsened by a 12 per cent dip in revenues from the US and Bahamas, which dropped to MYR343m.
Genting Malaysia said: “Excluding this impact, revenue increased by three per cent primarily attributable to higher contribution from the Hilton Miami Downtown hotel. Adjusted EBITDA also improved by 32 per cent to RM305.8m, predominantly driven by lower operating costs as a result of ongoing improvements to operational efficiencies at Resorts World Bimini.”
As for the outlook in Malaysia it said the market would remain ‘challenging.’
“In view of the severity of the casino duty increases announced in the Malaysian Budget 2019, the group will continue reviewing and managing its cost structure,” it said. “This includes reducing or delaying capital expenditures and the implementation of various cost rationalisation initiatives such as manpower optimisation.The group will also continue placing emphasis on the execution of its marketing strategies as well as growing key business segments through yield management systems and database analytics.”
The main plus in the quarter was that Resorts World Genting recorded growth in business volume from the mass market segment following the introduction of new attractions under the Genting Integrated Tourism Plan which included Empire by Zouk, Zouk Club, the VOID, and the Skytropolis Funland indoor theme park It remains locked in a legal battle with Disney and Fox for more than RM4.2bn after the pair backed out on their commitment to a 20th Century Fox Theme Park at the site.
Genting Malaysia stated: “The development plans and options for the outdoor theme park are being reviewed amid ongoing legal proceedings. The group remains committed to the outdoor theme park at Resorts World Genting as a growth initiative in Malaysia. The group’s overall adjusted EBITDA was aided by lower foreign exchange translation losses on its US dollar-denominated assets of MYR2.3m as compared to a foreign exchange translation loss of MYR33.6m recorded in the same period last year.”