Game over: Genting Singapore to suffer profit woes under Casino Control Act

A 13% cut in gains looms over Genting.

According to Nomura, in the government's July 6 announcement which focused on five key aspects: crime, gaming, social, economic and tax, the government said that the proposed amendments to the six-year old Casino Control Act were broadly aimed to:

• Better align the legislative framework with the original policy intent of introducing the IRs in Singapore;

• Enhance law enforcement levers;

• Streamline regulatory requirements and operational process so that they keep pace with the international best practices and industry developments;

• Strengthen social safeguards; and

• Improve tax administration

Here's more from Nomura:

The implications from a number of the measures recommended in the proposed amendments to the Casino Control Act would likely be negative for the casino gaming industry both on a short- and long-term basis. In the next six months throughout the gaming licence renewal process, we believe the casino operators are unlikely to embark on any marketing activities. Against this backdrop, gaming revenues are unlikely to show any meaningful growth in the short term.

The longer-term implications are more serious since these amendments raise the question on Genting Singapore’s growth prospects and the ability of its cash flow generation to be sustained at current levels. Gaming taxes, which are currently among the lowest in the world, could be a target of review in the coming years, in our view.

We are making some changes to our gaming revenue assumptions post the 2Q earnings. Due to poor visibility on the gaming revenue trend and lack of historical data, we are taking the latest 2Q gaming volume as a guide. To reflect the changes in our 3Q and 4Q revenue assumptions, we are cutting our earnings forecasts by 13% to SGD782mn in FY12F and 18% to SGD821mn in FY13F.

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