image

An extraction of Singapore local media report on Genting Singapore (Sentosa) casino’s pathetic performance…

Assessment by Professional Ground: the bad in-flow of premium casino business to Sentosa casino would continue for at least another three years. Hence, under such a tight credit situation, Genting Singapore is caught in between a hard place and the rock!
On one hand, they cannot continue with the leakages – uncollectable bad debt; yet they need to continue to operate under CCF (chips credit facility) scheme/programmes.
Without CCF program, there’s no premium (VIP) casino business.
And, coupled with another not so good factor – Southeast Asian premium players must be motivated solely (almost all) by CCF before they would come.


image

Media report commented By:  Professional Ground

According to extracted media report of Singapore, Genting Singapore’s Q1 net profit has plunged 73%.
Those who are following the reported comments by Professional Ground, would not take this outcome with any surprises.

image

As we have been closely following the way Genting Singapore manages its IR casino business and operations; and all the while we have mentioned that Genting Singapore fails in their VIP business organization with so call in-house credit extension as well as International Marketing Agents. The main reason for continuous or performance plugged by VIP programs is due to, unsustainable high volume non-negotiable chips of their out-molded business model adopted from Genting’s old days.

Mass market segments are also plugged by high restriction of domestic casino patrons and, low casino floor efficiency.

China market no longer providing sustainable premium players as in the good old days.
The Junket operators from Hong Kong and Southern China are very fragmented and under tremendous suppression since 2013. The bad weather isn’t going away soon.

We assess that Genting Singapore will continue to weather through such “bad luck” (high credit losses and very low Win %) for the foreseeable future.


image

By:  chief consultant, Professional Ground Expert Panel

The above media report hits the nail on the head.
In the past, Genting casinos could only based on one simple method to develop VIP business, that’s free use of credit.

In the more complex gaming arena these days, such out moulded way of VIP customer acquisition could only bring down casino’s profit.

Simply put, Genting thought it could operate like what’s in Macau, just using credit to run VIP business.
In fact, it shows that Genting is still very lacking in the real in-depth understanding of operating complex VIP vis-à-vis Junket operations. There’s more to just using credit to churn the business…

Our suggestion – A Sell rating.
Reason: Genting’s predicament in VIP services will not improve.
And, the mass gaming market in Singapore and South East Asia region are limited.


image

By:  Professional Ground panel

Two major factors that kill Genting’s casino VIP business:

1.  Inability in (valued) customer acquisition; this is about what type of rolling chip program casino patrons the casino can solicit and maintain over longer period of time and frequent visits.

2.  Failed in sustaining VIP rolling chips High Turnover ratio. This is concerning the net non-negotiable chips volume every week/month that can be matched at very high level of wagers… In order to create higher win %.

As a matter of fact, if Genting RWS casino in the IR continues to operate under such limitations, there is no room for improvement at all…

The extremely low win% of 2.2% on rolling chip programmes already proves a very dire situation; unless the management continues to look elsewhere!

Sell.


image

image

Extracts  of media reports

Assessment by Professional Ground

As reported by the media, Genting isn’t qualified and failed on the bidding of new casino resorts in New York.

In our assessment, Genting would be more likely to obtain licences in some Indian Reserves in the US, but not in any of the prime area such as New York.

One major factor, Genting’s culture just could not be easily assimilated into any local environment outside of Malaysia. That’s also the reason Genting didn’t get the in route into Macau.

Everyone hopeful would think that Genting had a good fighting chance to bid for the potential casino resorts licences in Japan, when the timing is right. We think otherwise. Japan is not at all the right playground for Genting Group. We count Genting’s Japan adventure will be even lesser chance than in the US.

We foresee the strong bidding power for a liberated Japan casino market to include Wynn Resorts, LV Sands, Melco Macau and MGM.


image

As reported by Chinese media, it is apparent that,

~ as from now till mid 2015 Macau’s casino revenue will remain stagnated.

~ China president XI would continue his plan to wipe out corruption within the Communist Party.

~ it is very difficult for Macau and China’s Underground Money Channel to conduct the flow of illegal funds from mainland to the casinos.

~ Macao’s VIP casino business and Junket operators are facing huge challenges in overcoming the tides.

~ casinos in Macau have already reached their limits in soliciting the Rolling Chips business. The next 6 months would be their winter.


image

Commentary on the extracted media report

By:  Professional Ground

Investment analysts have to take note of the following:

– the dire tends for Macao’s Junket operators will stay for at least up to June 2005 of not longer throughout next year.

– Macau casinos have no choice but to negotiate with Junket operators to lower the commission to 1.5% or lower as the volume may continue to drop.

– Junket operators in the past have been over reliance on Chinese VIP source but going forward they have to learn to complete for East Asian clients from Japan, Taiwan and Korea.

– it must be noted that mass gaming market in Macau enclave has already hit the ceiling. Not much is left for further digging, against the backdrop of over supply of mass gaming tables.

Singapore casinos have also indicated a clear tend – that both the domestic and overseas markets cannot support continued growth of mass gaming revenue!
To make things worse, Singapore casino scene will not accommodate a full-blown Junket operating ground, in view of its right casino regulatory regime.


image
image

Comment by Professional Ground

Indeed we have No Comment at all.
The penalists had detailed key factors on why Genting Singapore (RWS) casino would doom in our previous articles and commentaries.

VIP revenue dropped by 21% yoy. With lack of non~negotiable chips turnover, the situation would only get worse in the coming quarters. Mass gaming floor is already “dried Up” due to low domestic gaming demand.
3rd quarter EBITDA was S$254m, dropped by 27% yoy.

Essentially the bad situation surrounding Genting Singapore will not go away till mid 2015. Another round of analysis and projection will be conducted by then. From sources, China’s reform and smashing up corruption will continue at least through the year 2017. So, don’t expect any relaxing on the “flow of funds” from mainland China to Singapore casinos…
Hence, one can forget about growth in VIP volume for quite a long while.

And, for Southeast Asian VIP markets the casinos need to dig into huge CCF facility and huge credit risk exposure, which is not a sustainable operation.

Only recommendation (for Genting Singapore stock):  SELL
*target price ~ 80 cents


image

Commentary by:  Professional Ground

As reported by Singapore local media, Genting Singapore stocks are performing from bad to worse.

It is expected that its stocks may fall below S$1.00

Professional Ground asssses that such scenarios are probable because of,

~ Genting Sentosa casino still yet to improve on its mass gaming floor efficiency, its Hold % is stagnated.

~ tremendous reduction of China VIP rolling chips business. High rolling of vip table waging is not sustainable.

~ high debt ratio for chip credit facility CCF and non performing collection.

~ Japan? Not a chance even the country goes for deregulation of casino sector for foreign operators. It will be the playing field for American casino operators such as Wynn and LV Sands.

image

AS a whole, we don’t think that Genting Singapore is on the recovery path at all. The worse is yet to come, for them.


Commentary by:  Professional Ground

Our assessment of Genting Singapore RWS casino revenue / profitability is even more pessimistic than the general evaluation of investment analysts.

Reasons are simple, as follows:

~ the credit crunch in China will NOT be lifted in near future as in 2015 or 2016. This is based on the key policy by the Chinese premier Li, in that he needs to revert the over heated Chinese domestic market due to over leveraging on bank credits. The control measures will stay for at least next two years.

~ it is a very different scenario from Macau enclave, RWS Genting has very limited capacity to bring into their casino, what we called ‘sustainable high volume’ non~negotiable chips play! Therefore, their over~crediting and associated credit risk exposure will continue to loom.

~ RWS Genting apparently is still very weak in the two critical revenue churning practices:
    a.  Lack of floor efficiency to generate high enough HOLD % on its mass gaming floor!
    b.  Lack of powerful Junket partners to SUSTAIN high enough rolling chips turnover in order to increase its VIP programs WIN %!

So, for the next two years at least, there’s a long shallow casts overhead on Sentosa RWS casino….
Forget all ths BS about ‘Chinese high~rollers wild card’. Simply put, RWS is dealt with a Bad Hand!

image