Thursday, August 11, 2022

Mass market turns south in Singapore


Singapore’s two operators are seeking to add more non-gaming attractions to boost growth as income from their casinos continues to drag, with results released this week showing an unexpected drop in mass revenue at Marina Bay Sands.  

Casino revenue for the quarter fell 1.6 percent to $556.7 million, with adjusted property EBITDA dropping 1.7 percent to $357 million. The property reported a drop of 29 percent in its rolling chip volume, but more unexpected was the almost 11 percent drop in mass market volume year-on-year. Slot handle gained 6 percent.

Las Vegas Sands chief operating officer Robert Goldstein told analysts on a conference call that he’s hoping that the market will rebound over the summer, as the company has been “hyper-focused” on the mass sector.

“The question is, is that a short-term blip, the 90-day miss or is that a trend, we don't know at this point,” he said.

The Marina Bay Sands results prompted some analysts to revise down their estimates for rival Genting Singapore to reflect the same trends.

Union Gaming says it’s the first year-on-year decline in mass table GGR on a constant currency basis at MBS since 2012.

“Given that MBS generally outperforms Genting's Resorts World Sentosa, we have to assume that RWS is likely to experience mass market softness in 2Q16 as well,” the firm wrote in a note.

Genting estimates cut

VIP volume is expected to drop 30 percent, compared with a previous estimate for a decline of 26 percent, while mass/slots volume is seen declining 7 percent from a previous forecast of a gain of 2 percent, the note said.

Some of the weakness in the mass sector has been attributed to the strength of the Singapore dollar against other regional currencies from where the island draws much of its tourism. The VIP story is the same as that in Macau, with Beijing’s anti-corruption drive continuing to reverberate through the region’s gaming hubs.

Singapore gets about half of its VIP revenue from mainland Chinese players, while tourist arrivals from Indonesia and Malaysia fell 10 percent and 5 percent respectively last year.  

However, those currency fluctuations don’t appear to have hit the group’s non-gaming operations. Las Vegas Sands Chairman Sheldon Adelson pointed to the fact that room rates and mall revenue had proven to be resilient, highlighting the need for further non-gaming expansion.

The average room occupancy rate was 96.4 percent, while food and beverage revenue gained a healthy 11 percent. Revenue from retail tenants rose 3.1 percent to $138.6 million.

Las Vegas Sands has said it may seek to add another hotel tower at its iconic Marina Bay Sands property. The company wants  to add another 1,000-1,200 rooms, along with an entertainment arena.

Waiting game

Adelson has said the company is currently waiting to hear about the price of land before making a decision, but if it gets the go ahead it could begin working on designs before the end of the year. The new tower would have a similar design, with a rooftop pool, but wouldn’t be connected to the existing towers.

On a conference call with analysts this week, Adelson said there has still been no government response.

“We're hoping after the summer when vacations are completed, that we'll approach the government again and see if we can get a final answer there, which we don't have at this time yet,” he said.

Last year, Genting Singapore opened its new hotel in Jurong, helping add capacity, especially at the mass end of the market. To add to its non-gaming attractions, earlier this year it also opened its new Curate restaurant. The 62-seat venue plans to host Michelin-starred chefs from around the world.

Marina Bay Sands has extensive MICE facilities, whereas Genting Singapore owns the Universal Studios theme park, as well as the S.E.A. Aquarium.

Bad debt lingers

As the VIP market has slumped, both companies are also dealing with the fallout in the form of bad and doubtful debts. Singapore doesn’t have junket operators, which has lead to significant exposure to poor credit.

“In Singapore account receivables have been falling, but bad debt provisions remain elevated,” Morgan Stanley said in a recent note.

MBS provisions for doubtful debt stood at 23 percent of VIP revenue in Q1, while Genting provisions are likely to be about 24 percent of VIP revenue in 2016, little changed from the 27 percent reported in 2015.  

Genting has been taking action to tighten its credit policies and deal with bad debts, but of the two operators it is seen as being in the weaker position.

“Aside from capital allocation, the unwinding of non-performing gaming credit has taken longer than expected, and this issue may not be fully resolved until the end of 2016, putting pressure on profitability and cash flows,”,said Bernstein in a recent note commenting on its decision to downgrade the company from outperform to market perform. “Meanwhile, tightening credit to high rollers further suppresses VIP revenue, and Genting faces strong competition from Marina Bay Sands in the mass segment,” it said.

In Q1, Genting Singapore reported net profit fell 83 percent year on year to S$10.8 million (US$7.9 million), due to higher foreign exchange losses, higher bad debt provisions, finance and other costs.

 

Asia Gaming Brief is a news and intelligence service providing up to date market information for worldwide executives on relevant gaming issues in Asia.

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