Genting Malaysia goes through biggest stock downgrade since 1989

Genting Malaysia suffered its worst one-day fall on record as most analysts downgraded the stock after the government announced Friday that casinos’ annual fees and duties on gross income will be raised.

The Malaysian casino operator tumbled as much as 30 percent, the biggest drop since its 1989 listing. Its parent Genting Bhd. fell as much as 12 percent, the most since 1998. Genting Malaysia was down 20 percent as of the midday break in Kuala Lumpur while Genting traded 3.8 percent lower.

Finance Minister Lim Guan Eng announced in his budget speech Friday that the annual fees for casino licenses will be increased to 150 million ringgit ($36 million) from 120 million ringgit. He also said the duties on casino gross income will rise to 35 percent from 25 percent previously.

Brokers including Affin Hwang Investment Bank, AllianceDBS Research, Nomura, Public Investment Bank, TA Securities and UOB Kay Hian downgraded Genting Malaysia following the tax hikes.

While a gaming tax increase had been an ongoing risk, the market had only factored in a 5 percentage point tax rise, Nomura Research analysts Tushar Mohata and Rahul Dohare wrote in a note Monday. They cut Genting Malaysia’s rating to reduce from buy and its price target to 4.20 ringgit a share from 6.50 ringgit . The tax hikes will dent the the company’s net income by 600 million ringgit to 700 million ringgit for 2019 and 2020, Mohata and Dohare said.