ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

Business Times - 23 Feb 2011

Resorts World Q4 revenue pulls ahead of rival MBS

But both IRs post similar earnings due to lower luck factor at RWS' VIP business

By GRACE LEONG

(SINGAPORE) An increase in VIP or premium player volume helped Genting Singapore's flagship casino Resorts World Sentosa snag higher revenues for the fourth quarter than rival Marina Bay Sands.

But both IRs, or integrated resorts, posted similar Ebitda figures or earnings before interest, tax, depreciation and amortisation for the fourth quarter, because RWS, despite its higher revenues, had a lower luck factor or lower win percentage in its VIP business in the fourth quarter, analysts said.

Mainboard-listed Gent- ing said yesterday in its fourth quarter and full year earnings report that RWS had Ebitda of S$389.8 million on revenues of S$775.2 million for the fourth quarter ended Dec 31.

This is comparable to Marina Bay Sands' Ebitda of US$305.8 million (S$389.9 million) for its fourth quarter. The Las Vegas Sands casino reported net revenues of US$560.4 million (S$714 million).

But MBS generated a higher Ebitda margin at nearly 55 per cent, compared with RWS's Ebitda margin of 50 per cent.

While RWS saw a 40 per cent spike up in VIP rolling chip volume quarter-on- quarter versus a 21 per cent drop at Marina Bay Sands, RWS 'played unlucky in its VIP segment' or suffered a lower win percentage, which reduced its Ebitda, Union Gaming Research Macau explained in a report issued yesterday.

Excluding the lower luck factor, RWS's Ebitda would have been in a range of S$425 million to S$440 million, Union Gaming said.

Union Gaming noted in the report that the increase in RWS's VIP rolling chip volume and market share didn't come as a result of increasing player rebates, which remained flat at around 1.2 per cent of rolling chip volume.

Genting also attributed the 6 per cent improvement in RWS's fourth quarter revenue from S$731.8 million in the third quarter to a 'significant contribution from Universal Studios and the hotels.'

The casino operator reported a daily average of 8,300 visitors to Universal Studios with an average spend of S$85 per visitor.

RWS's fourth-quarter hotel occupancy was 79 per cent with an average room rate of S$294. 'RWS is attracting more overseas visitors with the success of Universal Studios,' said Aaron Fischer, head of consumer and gaming research for CLSA Asia Pacific Markets.

'Also, RWS seems to be issuing more credit to overseas and local VIP players,' he said, adding that these premium players are from Indonesia, China, Malaysia and Singapore.

'Both RWS and MBS reported excellent Q4 Ebitda numbers,' Mr Fischer said. 'But it seems that MBS did better in the mass (segment), while RWS was stronger in the VIP segment. Over the medium term, we prefer earnings from mass as it tends to be more predictable.'

For fiscal 2010, Genting Singapore reported net income of S$657 million on revenues of S$2.75 billion.

The company returned to the black in the fourth quarter with net income of S$91.7 million, compared with net losses of S$95.2 million a year ago, but down from S$187.8 million in the third quarter.

Separately, Nomura Financial Advisory and Securities said that Genting isn't expected to be badly affected by the Singapore government's planned increase in levies for companies hiring foreign workers.

'As for Genting, about 75 per cent of its 8,000 workers are Singaporeans or Permanent Residents. According to our estimates, the proposed increase in levies on its foreign workers could slash 2013 Ebitda margins by a small 15bp,' Nomura said in yesterday's report.

Genting Singapore shares fell two cents, or one per cent, to close at $1.98 yesterday.

any comments on the counter?

Currently the casino market in SG is about 6b per year. I believe if gov were to grant junket to Genting, the revenue could double to 12b.

That could translate to earning of about $1.6b per year for Genting. (currently about 800m, excluding those one-off items).

May 5, 2011
Genting Singapore loses $1.95b in market value
By Goh Eng Yeow, Senior Correspondent

IT IS difficult to gauge just how much impact the looming general election has had on casino play Genting Singapore, which has lost a staggering $1.95 billion in market value as it slumped 7.1 per cent in the past week.

In a report last week, Nomura Equity Research analyst Lim Jit Soon suggested that the Government might have to review some policies such as those affecting the integrated resorts if it achieves a significantly reduced popular vote on Saturday.

This has led some traders to wonder if the counter's recent weakness is due to some investors lightening their Genting holdings ahead of the polls.

But dealers believe that the elections may just be an excuse for investors to take profit on the counter since the stock had climbed to a six-month high of $2.24 last Tuesday.

Another factor tripping up Genting, ahead of the release of its results on May 12, may be the poor showing of rival Marina Bay Sands (MBS), which unveiled its first-quarter performance yesterday.

Genting's weakness yesterday as it shed four cents to close at $2.08 on a hefty volume of 123.2 million shares could be a knee-jerk reaction to MBS' poor performance, they say.

Still, analysts are hopeful that the counter would enjoy a rebound soon.

UOB Kay Hian analyst Vincent Khoo said in a note yesterday Genting could move up to $2.30 if its first-quarter results turn out to be strong. He had earlier predicted the casino operator might achieve operational earnings of $470 million for the first quarter. 'We reckon that Genting Singapore's Resorts World Sentosa can deliver strong first-quarter earnings, driven by growth in its VIP rolling chip volume and substantial win percentage,' he said.

In contrast, MBS' operational first-quarter earnings of $349.6 million were below expectations. 'Hypothetically, if we apply the theoretical 2.85 per cent win percentage, MBS' operational earnings would be around $385 million,' he said.

Mr Khoo also noted that MBS' performance might have been hurt by the departure of a few key international marketing team members, and that it appeared to be experiencing a flattish mass market in the first quarter.

One other factor which might have contributed to Genting's weakness is the regionwide sell-off by fund managers as the United States dollar strengthens, which makes borrowing costs to fund their gambling bets on Asian equities more expensive.

The sell-off also hurt other casino plays. In Hong Kong, SJM Holding has fallen 2.4 per cent, while Wynn Macau is down 4.5 per cent since Monday.

Genting SP recent result was superb. However, analyst has collectively claimed that it was due to exceptionally good luck. Anyone has knowledge in this industry?

Hope to hear your views!

Sometimes u need to recee the casino and talk to the gamblers to understand more.
My recent recee tells me that more people prefer to gamble in MBS and will buy their annual member when their current one(RWS) expire.
I am talking abt high roller area on the second floor.

Thanks WolfT for sharing your research!

MBS does appear to be more appealing to the China tourist, because it looks more grand. RWS seems more for the mass market kinda place.
From the results so far, both casino got quite a fair share of the pie.

I'm now looking forward for the award of junket operation. As I believe that will drive more VIP to visit Singapore, instead of other places like Macau and Perth. Singapore has the lowest gaming tax on VIP (about 8%), which is much lower than other places (above 20%). That leaves Genting in a good position to offer more incentive to the junkets.

But when the CEO was asked about the benefits of junket in the AGM, he claimed that there won't be significant increase in revenue. Junket only helps to reduce bad debt, as the risk of default is passed to the junkets (junket extend credit to VIP).

Another booster to Genting would be a new license in either Taiwan, Korea or Japan. Taiwan is modeling after Singapore to try to expand their tourism. So, I believe despite public objection, they will approve an integrated resort in Penghu.

Please feel free to post your views!

Taiwan Government tried but did not proceed. Penghu residents rejected the Casino idea long time ago in a referendum.
Anyway Taiwan has many other tourist spots.


Cory

Opps! Sorry, it's Kinmen instead of Penghu. Please see report below.

=======================================
http://www.asiaone.com/News/Latest+News/...63159.html

Casino project in offshore islands gets underway
Sat, Feb 12, 2011
The China Post/Asia News Network




After the casino project in Penghu was vetoed by local residents' referendum in 2009, another casino project in offshore islands such as Kinmen and Matsu is underway.

Taiwan Tourism Bureau announced that it had authorized a consultant company, Macau based Ocean Tech Group (OT Group), to work on an international Integrated Resort (IR) including a casino in a survey this month. There will be more than 40 companies around the world surveyed in this project.

According to the Tourism Bureau's website, OT Group is in charge of the IR including a casino project. They will design the concept to include a theme park, hotel, expo, shopping mall and casino for the government.

The list of potential operators is confidential, said the OT Group. But it's believed that top 10 casino and resort operators from Las Vegas, Macau, Austria are interested. The OT Group will analyze more than 40 selected potential operators' questionnaires, including location, land size, investment amount, casino size, etc.

The OT Group will suggest criteria and requirements for Tourism Bureau to review the operators' proposals of IR investment.

According to an officer of Ministry of Transportation and Communications (MOTC), the IR with casino licenses is unlimited.

The Government is planning to setup IR with casinos in offshore islands to attract more tourism investment with hotels, shopping malls, theme parks, and Meeting Incentives Conferences and Exhibitions (MICE). Casinos will not be allowed in Taiwan's mainland, an officer of Council for Economic Planning & Development (CEPD) said, but casinos on offshore islands can still be an option.

Among the islands, Kinmen is expected to be the first priority in opening casinos. Thanks to the three mini links, Kinmen is deemed as the real thing to embrace the China market advantages. To increase more tourists to Kinmen, the government will allow Foreign Individual Travel (FIT) for Chinese visitors to Kinmen in April 2011.

In order to pass the referendum by local residents, the MOTC plans to convene three seminars at Kinmen and other islands next month.

The Tourism Bureau's IR project is underway. It hopes to let IR in business in the end of 2013. The MOTC will request for concepts & proposals from operators in 2011.

-The China Post/Asia News Network

http://www.yogonet.com/english/2010/09/0...onte-carlo


The country attracted 9.7 million visitors last year
Singapore seeks to be Asian Monte Carlo

Singapore | 09/07/2010

(Singapore).- A prime destination mainly for bankers and businessmen, Singapore also has started drawing tourists with a slew of new attractions, the most popular being two casino-complexes built at a cost of over us$ 10 billion that opened earlier this year.

The two casinos and their related attractions represent the new face of a city that wants to transform itself from regional trade and financial centre into a place for both work and play. "I'm looking out of my window at the new skyline. What has developed over the last five years has been amazing," Hanspeter Brummer, CEO for Asia at Swiss private bank BSI, said from his office which overlooks the new Marina Bay financial district.

“Singapore is more than just Monte Carlo, which is a bit artificial. Singapore doesn't just have one industry but a number of industries. People really have good reasons to come here," said Brummer, a Swiss national who worked in the city-state from 1997 to 2000 and returned in 2006. Unlike the existing central business district, Marina Bay, built on reclaimed land around the mouth of the Singapore River, comprises not just office skyscrapers but also shops, residences, theatres and the towering us$ 5.5 billion Marina Bay Sands built by US casino giant Las Vegas Sands.

Marina Bay is also home to the world's biggest ferris wheel, restaurants fronted by Michelin-starred celebrity chefs and the world's first night-time Formula One circuit. Over at Sentosa, to the west of the central business district, Genting Singapore's Resorts World casino and its Universal Studios theme park opened in February. The us$ 4.8 billion complex earned us$ 369.9 million before interest, tax and depreciation in the three months ended June 2010.

Should Resorts World continue to rake in similar amount of money in subsequent quarters, it would surpass all rivals in Las Vegas and Macau in terms of profitability, analysts say. Las Vegas Sands has not yet reported earnings for the June quarter but CEO Sheldon Adelson has said he expects Marina Bay Sands to generate gross earnings of over us$ 1 billion annually. Although both casinos have yet to complete all their attractions, which include what will be the world's largest oceanarium, they have already created new business for hoteliers and taxi drivers.

Visitors to the city-state of 5.1 million people rose by over a-fifth to around 6.5 million in the seven months to July from a year ago. Hotel occupancy hit 90 % in July, up 10.2 percentage points, while room rates rose 20 % on average from a year earlier. Taxi drivers say their takings are up by as much as 30 %, helped by increased business in the wee hours of the morning from casino patrons. "The integrated resorts are a catalyst to bigger and brighter things. We are seeing more entertainment centers popping up... We are in the incipient stages of what we call a change in the structural demand for such services in Singapore," said Vincent Yeo, CEO of CDL Hospitality Trusts which owns M Hotel.

“There are still many attractions that are not opened yet," he added, citing the two casinos' unfinished projects as well as government initiatives such as new landscaped gardens, a river safari and an area for motorsports. CDL's Yeo said the 90 % occupancy levels will continue for several months until new hotels open, meaning visitors may have difficulty finding rooms from time to time. Singapore's transformation began in 2005 when the government legalized casinos as part of a plan to double visitor arrivals to 17 million by 2015. Singapore attracted 9.7 million visitors last year, and the number could rise to just under 12 million this year if the growth pace continues.

The figures do not include the thousands who cross over from Malaysia daily by land. In the past, many came to work and returned the same day but a growing number are here to gamble as seen from the large number of Malaysian-registered cars in casino carparks. Tourism currently accounts for about 7 % of Singaporean economy but could grow to around 12 % by 2015 based on government projections on visitor spending, economists estimate. The transformation has detractors though-from Singaporeans unhappy about the large influx of foreigners who have contributed to soaring property prices and crowded roads to those who fear the casinos will bring with them crime and other vices.

The tiny city-state has long been a centre of trans-shipment and regional finance, coupled with strict government control over its people. It has near-zero crime and sparkling clean streets but also flogging, the death penalty, and a ban on chewing gum. While Singapore appears to have successfully prevented a rise in prostitution and loan sharking, there has been an increase in problem gambling. According to local TV station Channel NewsAsia, Singapore's National Council for Problem Gambling has seen almost as many problem gambling cases in the first half of 2010 as it did for the whole of 2009.

Economists such as Citigroup's Kit said Singapore had little choice but to develop tourism, as it needs to create relatively low-skilled hotel, restaurant and retail jobs to replace those lost at factories that move to China and other cheaper places. "Rebranding Singapore as a global city and tourism hub fits in very well with its natural advantage, which is its strategic location in the centre of Southeast Asia and good transportation links," said Kit. "If well managed, services can be a more sustainable source of competitive advantage than manufacturing, which is footloose and very price-sensitive," he said.