Malaysian firm Genting’s new entry into the online gaming market shows the company’s pro-active stance in diversifying and expanding its income base, according to OSK Investment Bank Research.
Genting’s unit Genting International Ltd has ventured into online gaming after gaining approval from Singapore Exchange Securities Trading on Thursday of last week.
The approval is likely to mean Genting’s subsidiary Genting Stanley Alderney Ltd will apply for an online gaming licence in Alderney and/or the United Kingdom from the Alderney Gambling Control Commission.
OSK Research have said despite the fact that Genting’s move into online gaming will not contribute significantly to the group, it is critical to sustaining earnings growth in the long-term.
They also believe online gaming is more likely to attract leisure oriented players who will contribute to Genting’s revenue growth rather than hardcore gamblers. Evidence for this is in the growth of more basic gambling formats targeting the mass market, in particular gaming and lotto.
“For the first time, gambling products are competing with other forms of mass entertainment for consumer attention and spending.” It said.
OSK Research have said that UK consumer spending for online gambling is expected to rise from £660 million in 2006 to £1.6 billion in 2010, as they quoted statistics from electronic consumerism publication Screen Digest.
The study has revealed that the number of active UK clients would increase by a million from 1.1 million in 2006 to 2.1 million in 2010.
It has also reported that the £730 million market size for online casino gambling indicates a penetration rate of less than 2 percent of the UK adult population and accounts for less than 7 percent of the UK’s total gross gambling yield.
Industry consolidation had an explosion in 2005 with 32 transactions involving online gambling firms worth more than £3 billion from 9 deals valued at £200 million just a year beforehand. At the present time, there are over 30 online casino firms operating in the UK.
OSK Research has said that despite the industry’s amazing growth, this may see a slow down due to tax rates. Since April 2007 online gaming firms based in the UK must pay a 15 percent tax.
15 percent was a far higher figure than the 2-3 percent that the online gaming companies were hoping for. OSK Research have said this means UK firms will find it hard to compete with offshore online gaming firms.
OSK Research added, “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.”
