MALAYSIA. Dufry and Ho Wah Genting Berhad (HWGB) have struck a joint-venture agreement to manage a duty and tax free shop in SkyAvenue Mall, which is located at the popular tourist spot of Genting Highlands Resort, Pahang.
Dufry (through its Dufry International division) will hold 51% of the shares, with HWGB holding 49%.
The main target of the store will be tourists from China’s Mainland, said HWGB. It noted: “The outlet will have a wide variety of differentiated products to reach out to other tourists and local consumers.”
HWGB said in a stock exchange announcement: “The outlook for Malaysia’s tourism industry is expected to remain positive going forward. HWGB Group through the JV Co will have the opportunity to tap into Dufry Group’s strength in travel retail business, and to expand into the travel retail business in Genting Highlands Resort, Pahang, Malaysia. The expansion will enable HWGB Group to share the operating results after tax of the JV Co and is expected to contribute positively to HWGB Group’s result in the long term.”
The company underlined the strong potential for tourism in the country, noting that arrivals to Malaysia increased by +4.3% to 26.8 million in 2016. Tourist receipts rose by +18.8% year-on-year to RM82.1 billion (US$19.5 billion) in 2016.
The JV will begin with an initial paid-up capital of US$500,000. HWGB’s proportion of the total expected investment cost is around RM9 million (US$2.1 million), with its funding internally generated or from borrowing, the company said.
Citing potential risk factors in its stock exchange announcement, HWGB said these could include:
*Competition from other outlets: Shops located within SkyAvenue Mall “may create cannibalisation of sales to the JV Co. This will be mitigated by the one-stop shop and category management approach by the JV Co;”
*Competition from Genting Premium Outlet in Awana: This could create competition for apparel sales, noted HWGB, but the JV “will focus on different assortments or non-apparel including perfume & cosmetics, watches, jewellery and others to complement the range”.
Dufry told The Moodie Davitt Report that it could not comment until contracts were finalised.
