KUALA LUMPUR: RHB research is neutral on the news that Genting Malaysia Bhd
has withdrawn its application for a review of the terms for tax incentives.
"We are neutral on the news as we have not factored in any potential improvements in effective tax rates to 10-12%, following the filing of judicial review in January.
"We revise our FY19F-FY21F earnings by 3.5-3.6% after factoring in a higher effective tax rate of 18% from 15%," it said.
RHB also noted that there may be a reversal of tax credit of RM201mil, recognised from 4Q18 onwards, in the upcoming quarter, which will be treated as a non-recurring item.
It added that the quantum of qualifying capex on the MYR10.4bn GITP investment remains unchanged and is claimable as long as the business is a going concern.
The research house maintained its buy call and target price of RM3.90 on the counter.
On Jan 23 this year, Genting Malaysia had filed a judicial review to challenge the Finance Ministry's decision to prolong the utilisation period of its tax incentives.
In spearheading cost rationalisation efforts, the group CEO has said he will be taking a 20% cut to his remuneration, which in FY18 amounted to RM93.52mil and would save Genting Malaysia about RM18.7mil.
"The news is in line with our expectations as we have factored in some cost savings initiatives in our model.
"Nevertheless, we expect the impact on EBITDA margin to be less than the 10% hike in gaming tax given the cost cutting initiatives and higher revenue base," said RHB.
