Unique Challenge for the IR Casinos

Posted: February 3, 2010 in Uncategorized

Commentary by:   Professional Ground’s Panel on Casino 

3rd Feb 2010 

Now that the state of casino control for the IRs was made absolutely clear by the Singapore gaming authority, with the recently released junket control regulation, and our Panel has therefore revised the IR casinos scenarios accordingly, and pinpoint the following two most likely outcomes to happen.  (Readers may refer to earlier article posted on 13th Nov 2009).
 
(1)  The IR casinos may still start with a “Small Star”  outcome as indicated in the top left-hand quadrant as shown in the chart below. That will be the state of attracting mass market gamers because of a new destination attraction for the first year or so.  But it is unlikely that VIP gaming business will take off, in view of the highly restrictive junket control regulation. Without strong junket players network in operation, the IR is facing an uphill task, even though the casinos will try very hard on the direct premium players source.  Even though Mr. Adelson extended his bold expression to bear (huge) credit & collection risk, industry experts would know that this is a “designed to fail syndrome”.
 
(2)  After the initial fever of new attractions start to wear-off, due to very small domestic market coupled with relatively limited credit base, thin-out propensity of spending in Southeast Asia and West Asia, the mass gaming market will likely be stagnated.  If the mass gaming revenue becomes inconsistent or without further growth, yet without the support of strong junket players network the IR casinos will slide into Winter Time (marked as No-through Road sign on the lower left quadrant) when the highly expected growth of VIP segment does not materialize; it will be a dire outcome indeed. By then, the authority might be pressured into loosening up its junket control regulation, in order to accommodate the survival calls of the two IR operators.
 
Many analysts and punters remain hopeful on the two IRs just because Macau is picking up and doing well again. But to say the least, Lion City IS NOT Macau and will never be.  In fact, Singapore IR casinos are more likely to look like the Atlantic City.  But who know, if the Lion City IRs might be quick to realize this syndrome and hence, steer this mega ship away from the iceberg. 

In conclusion, we have to agree with the judgment made by Citigroup’s report (as highlighted in The Edge Singapore, 2010 Feb 1 – 7 edition) about the outlook of Singapore IR – that expectation on the two IRs’ casino revenue is “irrationally bullish”.  Simply put, that our panelists’ suggestion of the most likely scenario outcomes seem to be in coherence with Citigroup’s claims.  

Update: Now there are only two likely outcomes on the left-hand quadrants

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