PETALING JAYA: Significant capacity expansions by casinos in the region have resulted in intensifying competition for Genting Malaysia Bhd ’s casino business, particularly in its mass and premium-mass segment.

Affin Hwang Capital Research said casinos in Cambodia, Philippines and Vietnam have recently expanded their capacities, emerging as Genting Malaysia’s “biggest competition threat” in the two segments.

It noted that Myanmar had also passed a new law in May to legalise gaming, leaving Thailand and Brunei as the only two countries within the Asean region in which casinos are still illegal.

While Malaysia had previously benefited as one of the few countries in the region with a legal large scale casino, more countries are starting to embrace gaming as another source of revenue, the research house said.

“Faced with stiff competition across the board, we believe that Genting Malaysia’s Malaysia property - Genting Highlands - might not be as attractive to visitors compared to the newer regional casinos.

“Local players (premium mass and VIPs) might also be tempted to try out the new regional casinos offering better complimentary perks and rebates and accessible in under four hours by flight,” the research house said in a note.

The research house said, however, that the local mass market segment was unlikely to be as badly impacted as minor changes in the complimentary perks were still acceptable, such as higher rolling volume for rooms and meals.

The mass market volume accounted for about 50% of overall volume in 2018.

Moving forward, Affin Hwang Capital Research said it will be challenging for Genting Malaysia to match the rebates and complimentary perks offered by regional casinos in lower tax rate jurisdictions, as it would need to sacrifice a significant margin to do so.

This, the research house said, was given that gaming taxes are charged on the gross gaming revenue.

“Minor tweaks on the complimentary perks are still largely acceptable to the mass and premium-mass players.

“However, the reduction in such rebates is unlikely to well accepted by the VIP players, as the rebates are based on a predetermined percentage of the overall bet of the player,” it said.

The research house reaffirmed its “hold” rating and 12-month target price of RM3.40 as it continues to believe that the hike in gaming tax will limit Genting Malaysia’s ability to compete with casinos around the region.

It noted that although the new non-gaming facilities had helped to drive up overall visitations for the mass segment, the VIP segment volume had declined significantly after the change in rebates.