Seeking wind for top-line sales

In the words of Las Vegas Sands Chief Operating Officer Rob Goldstein, “Singapore is a wonderful success story, but at this point it's just a very large producer of EBITDA without growth prospects in the near future.”

Goldstein was speaking to analysts after a record year for the company’s Marina Bay Sands property that saw adjusted property EBITDA up 24.6 percent to $456 million in Q4. The margin was a robust 52.5 percent, compared with just 34.6 percent for the company’s Macau properties.

Although management did a sterling job in controlling costs and squeezing the maximum profit out of the iconic resort, it showed little, to no, top line growth.  

Non rolling win was flat, edging up just 1.1 percent. Slots revenue showed strong gains, up 9 percent, but rolling chip volume was down 4 percent to $9.93 billion. VIP accounted for 17 percent of profit, compared with 8 percent the prior year.

It was a similar story at rival, Resorts World Sentosa, where parent company Genting Singapore’s results missed expectations. Net revenue was S$580 million, up just 4 percent year-on-year, but down 8 percent quarter-on-quarter. Casino revenue was up 5 percent on the prior year and down 8 percent sequentially.

Bernstein Research said the results missed its estimates for revenue, EBITDA and earnings, although GGR was better than it had forecast.

The lack of growth on the revenue side comes despite a strong recovery across Asia’s major markets last year, led by the VIP sector. Singapore itself saw record arrivals in 2017, with visitor numbers up 6.2 percent to 17.4 million, fuelled by an increasing number of tourists from the key China market.

Tourism receipts rose 3.9 percent to S$26.8 billion ($20.20 billion) in 2017, also a record high.

However, that spending is not finding its way onto the casino floors, leaving executives struggling to answer perplexed analysts’ questions.

Goldstein told analysts that in part, the lacklustre performance was due to the relatively small size of the VIP sector in Singapore compared with Macau. He also conceded the mass market had been relatively disappointing.

“I don't know why, I would say otherwise until the future, I don't see why there would be any catalyst in the near future to drive that.”

Chief Financial Officer Patrick Dumont agreed that the relatively small size of the VIP sector had been a factor, but also spoke about increasing competition from other Asian markets, such as the Philippines and the continuing draw of Macau for visitors from Korea and Japan. Although much of the focus has been on the VIP market, he said he was concerned about the flat trajectory of the mass market.

“We're going to keep at it, we've got a very good team on the ground there, we'll keep looking at cost but obviously we'll love to see some top flying growth and that's the best indications, or best thoughts I can give you on the growth prospects for Singapore.”

The company’s retail operations continue to perform strongly, although executives said there was no news to report as to whether it would spin off its Singapore mall.

However, analysts say there may be some light at the end of the tunnel. Maybank is expecting the higher visitor numbers in Singapore to translate into more spending at least in the VIP sector this year, as does ratings agency Fitch.

“We continue to expect the VIP market recovery in Macau to spill over into Singapore,” Maybank said in a note. “We also note positively that the high-margin industry mass market GGR resumed growing year-on-year in Q4, which we gather is due to improving consumer sentiment in Singapore.”

While, according to a recent Bloomberg report, China’s high-net-worth individuals are increasingly choosing Singapore over Hong Kong as a destination to park their money.

These individuals control an estimated $5.8 trillion the report said, citing consulting firm Capgemini SE. Part of the preference for Singapore is because it’s at a safer distance from scrutiny from authorities in Beijing than in Hong Kong.