KUALA LUMPUR (April 5): RHB Research Institute Sdn Bhd has maintained a "buy" call on its top pick Genting Bhd with sum-of-parts target price lowered to RM8.31 from RM8.79 previously, on the back of higher gaming tax rate and redevelopment of Resort World Sentosa (RWS) in Singapore.

The 3-percentage-point (ppt) increase in casino gaming tax rate beginning 2022 is manageable, as with the higher-than-expected RWS redevelopment cost, it said in a note today.

Its casino gaming tax rate will increase to 8% from 5% for the first S$2.4 billion of gross gaming revenue (GGR) in the VIP segment, and to 18% from 15% for the first S$3.1 billion GGR in the mass segment.

"A 3ppts hike will result in an estimated increment in tax of S$60 million (around RM180 million) in 2022 or 9% compared to Genting's FY18 consolidated earnings base of over RM2 billion, which is minimal," said RHB Research.

Genting Singapore Ltd will also invest up to S$4.5 billion for the expansion of RWS across a five-year period, with around 50% of new gross floor area of leisure and entertainment space.

"In return, the Singapore Government has extended Genting Singapore's exclusive rights as one of the two casino players in the country.

"Over the long term, the opening of the redeveloped RWS will draw new and returning tourists to this integrated resort, which may boost gaming volume," said the report.

"Overall, we think the 3ppts hike in Singapore's casino tax and higher-than-expected capex for RWS' redevelopment will have a minimal impact," it added.

RHB Research is also "slightly positive" on the purchase of superyacht Equanimity by Genting Malaysia Bhd.

The yacht can "woo VIP customers" and help Genting differentiate itself from competitors with a unique edge for its high-roller gaming unit, it said.

"We are of the view that the maintenance cost of the yacht and cruise operation will be manageable, and could be lower than the cost incurred by the government (RM5 million-RM6 million per quarter) given Genting's expertise in luxury cruise operations," it said.

"The purchase price of Equanimity is also minimal versus Genting's asset size of RM96 billion," it added.

At 10.32am, shares of Genting Bhd slid one sen or 0.15% to RM6.79.