According to OSK Investment Bank Research, Genting last week became the "first firm" in its country to venture into online gaming after obtaining approval from Singapore Exchange Securities Trading.
OSK Research, also based in Malaysia, with offices in Hong Kong, said that Genting's move into online gambling was critical in "sustaining long-term earnings momentum" for the firm.
The bank is maintaining a buy call on Genting at $1.05 with a target price of $1.43.
Leisure-oriented customers
According to the investment bank, online gaming has "the potential to appeal to more leisure oriented consumers" which will drive its power growth rather than "hardcore gamblers." This trend is demonstrated by the emergence of easier gambling formats targeting the mass market, like lotto. “For the first time, gambling products are competing with other forms of mass entertainment for consumer attention and spending,” the bank said in its report.Citing figures from the global market intelligence research on digital trends, Screen Digest, OSK Research said U.K. consumer spending for online gambling was expected to increase from $1.2 billion in 2006 to $3.1 billion in 2010.
The research report also said the number of active U.K. clients would grow from 1.1 million in 2006 to 2.1 million in 2010.
The report said the market penetration of online gambling was only at a rate of below 2% of the U.K. adult population and accounted for fewer than 7% of U.K.’s gross gambling yield. Thus, there is plenty of room for growth.
Currently, there are more than 30 online casino operators in the U.K. and its commonwealth countries.
However, OSK Research said that new tax rates might impact growth. Online gaming companies incorporated in the U.K. are now subject to a new 15% tax.
This rate was much higher than the 2% to 3% which online gambling companies had hoped for, and may make it very difficult for these firms to compete with offshore online gambling operators targeting the U.K. market, the banks said. “We are unsure at this juncture if Genting Stanley Alderney Ltd will be subject to the statutory 15% tax rate on online gambling companies incorporated in the UK,” the bank said in its report.
Genting said last week's regulatory approval will enable its subsidiary Genting Stanley Alderney Ltd to apply for an online gaming license in Alderney, in the British Channel Islands, or in England, Scotland or Wales.
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