Credit Card Service Tax -Overkill!

Credit card agents cried foul over service charge plan.
This is the first concerted backlash against the 2010 Budget to impose RM50 service charge for principal credit card holders.

On 30 October, 5,000 credit card agents and 18 credit card issuers through a joint press conference,urged the government to withdraw the tax proposal effective on 1 January 2010.Some of the representatives from over 40 sales agencies holding up credit cards showed their displeasure as their rice bowls are on the line.

Francis Teow, who runs a credit card sales agency in Penang, said banks would not be keen to maintain their large sales force if they were not confident of achieving the desired sales target when the RM50 tax is enforced.

As for the Government’s argument that the RM50 was seen as a way to encourage prudent use of finances, Teow said a better alternative would be to raise the interest on the minimum monthly repayment from the current 5% to 20%.

“However, the Government is well aware there are many cardholders with substantial amount of outstanding balances in their credit cards.

“And if they increase the monthly minimum payment, many will default payment and non-performing loans will increase,” added Teow.

Credit card sales agency director H.K. Tan said the service tax would not only have a negative impact on sales agents but also on card holders as well.

“The newly imposed service tax will affect low and middle-class consumers.

“Many can’t settle their outstanding bills, imagine having to fork out another RM50 for service tax,” he said.

Credit card consultant Kevin Choong said it was not viable to burden the industry that had done much for consumers with the new tax.

“Credit cards have reduced the need to borrow from loan sharks. Imagine, people who do not have credit cards to avoid paying the RM50 service tax, they may need to carry a lot of cash and they will become easy target for thieves.

“Or, if in case of an accident in the middle of the night and you need to be admitted into the hospital, the credit card provides you with financial security,” he said.

I think PM Najib is again ill-advised on this tax move just like what happened in the case of the RM10 billion Amanah Saham1 Malaysia unit trust.

YTL-E Solutions: Looking for One

YTL E-solutions Berhad (YTE-E), a subsidiary of YTL, has been slapped a fine of RM1.9 million by the Malaysian Communications and Multimedia Commission (“MCMC”)because Y-Max Networks(YMN),YTE-E's subsidiary failed to roll-out a WiMax network programme to achieve 25% population coverage by 31 March 2009.

Some background.

YMN was awarded the right to the 2.3 GHz spectrum in March 2007. Under the terms of the award, YMN was required to submit a business plan to MCMC with a roll out programme to achieve 25% population coverage by 31 March 2009. Subsequently, YMN changed its business plan and decided to build a nationwide network instead of undertaking a piecemeal roll out. Under its revised business plan, YMN will exceed the targeted coverage prescribed by MCMC by next year. The revised business plan has been submitted to MCMC for approval.

An appeal has accordingly been made to MCMC to reconsider its decision in light of the revised business plan submitted by YMN. YMN is awaiting the response from MCMC to its appeal.

Do you think MCMC was right to call the bluff to provoke the YTL bosses to sit upright to seriously look into their obligations?

Genting Malaysia:The Wynn Caper

Genting Malaysia Berhad (GENM) is a potential 'naughty company'with a cash horde of close to RM5 billion. It will definitely do something with it for profit either actively or passively.

And so we see the first action being unleashed;though a passive one.

To beef up its burgeoning coffers, GenM through its wholly owned subsidiary, Resorts World Limited has subscribed to the First Mortgage Notes in Wynn,Las Vegas LLC and Wynn Las Vegas Capital Corporation. Based on an exchange rate of RM3.3675 : US$1.00, Resorts World Limited, has on 20 October 2009 completed the subscription to US$15 million (approximately RM50.51 million) nominal amount of these Notes.The total amount of First Mortgage Notes issued was US$500 million in aggregate principal amount at 7.875% returns due 2017.

The Notes, issued at a discount of 97.823% of par, were offered by Wynn as part of a private placement of US$500 million in aggregate principal amount of the Notes and the proceeds will be used by Wynn to part settle some of its outstanding debts and for general corporate purposes.

The Notes are secured by a first-priority lien on substantially all of the existing and future assets of the Issuers, and subject to the approval of the Nevada Gaming Commission. The Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries, which also guarantee Wynn’s other senior indebtedness; and equal in right of payment with, or senior to, all existing or future indebtedness of Wynn and each of its guarantors.

For GenM, investment in these Notes represent a good opportunity to expand its investment portfolio and to enhance returns on its existing cash balances. With yield returns in excess of 8%, the investment generates an attractive return compared to what is currently attainable in the money markets or in other secured investments regionally, especially within the GENM group's core leisure and hospitality industry. Further, the Notes are secured against quality gaming and entertainment assets in Las Vegas.

The subscription to the Notes is not expected to have a material impact on the net assets or earnings per share of the GENM group for the financial year ending 31 December 2009.

Wynn is one of the leading casino entertainment providers in the United States, owning and operating two properties located in Las Vegas, Nevada. Wynn also owns and operates Wynn Macau in the Macau Special Administrative Region of the People’s Republic of China. For the financial year ended 31 December 2008, Wynn group recorded net revenues of approximately US$3 billion.

On 9 October 2009, Wynn completed a successful Initial Public Offering for Wynn Macau on the Hong Kong Stock Exchange, raising over US$1.87 billion in new equity.

The subscription to the Notes is prohibited under Paragraph 8.23 of the Listing Requirements ("LR") of Bursa Malaysia Securities Berhad ("Bursa Securities") and Paragraph 2.2 of Practice Note No. 11/2001 of the LR. Accordingly, the approval of Bursa Securities was sought and subsequently obtained on 13 October 2009 for GENM to subscribe to US$15 million nominal amount of the Notes, subject to the condition that GENM releases an announcement to Bursa Securities on the same.

So it looks like a passive inroad into the Wynn Casino Group has happened,opening possibilities for active participation of some Genting units into the casino activities in both Nevada and Macau.

For GenM shareholders, potential windfalls can be seen from fiscal year 2010 up to 2018 in terms of monetary returns.

Do they dare dream that GenM will strike out on other more active participation in the near future? For that we await Father Time to tell us all.