RWS Faces Reality

Posted: May 14, 2010 in Uncategorized

14 May 2010

Regardless the "Talk Up" of Genting Singapore stock pricing, reality prevails

Extracts of Inside Asian Gaming

The company said in a filing with the Singapore Stock Exchange that its adjusted Singapore EBITDA (earnings before interest, taxation, depreciation and amortisation) for the period were SD109 million (USD78.8 million), giving an EBITDA margin of 32.5 percent.

Extrapolated on a daily basis, that would provide EBITDA of approximately SD2.37 million (USD1.71 million) per day. If that figure were then annualised, it would provide RWS with EBITDA of SD865 million (USD626 million) over 12 months, or SD756 million (USD546.8 million) in calendar year 2010.   

There are, though, a number of variables that could count against projecting the 46-day snapshot across a whole year. One is the opening ‘bounce’ associated with most new properties, even in established casino gaming markets such as Macau and Las Vegas. Another is that because RWS opened on the first day of the Chinese New Year holiday, that could have had an additional distorting effect in terms of mass-market traffic to the resort. A third is that it’s not yet clear what impact, if any, Marina Bay Sands, the rival casino resort built by Las Vegas Sands Corp, will have on visitor flow to RWS. A fourth is that the industry will need more information about the split between mass market and premium (VIP) segment revenues and about the development and operation of the high roller segment in the Singapore market in order to understand the likely size of the market over a whole year. In Macau, high rollers provided more than 70 percent of gross gaming revenues last year.

RWS casino will continue to struggle under weak VIP gaming syndrome

 Professional Ground casino panel’s assessment:

First and foremost, we are not surprised of the Q1 2010 operating result posted by Resorts World Sentosa.

Here’s the straight forward viewpoints as follow –

(1)  With opening during Chinese New Year period and without Marina Bay Sands in the “Ring” yet.  Judging from this, it is indeed a disappointing result for RWS.  Those who think that the market will grow by many folds after MBS opens, may be more disappointed by the eventual outcome.

(2)  The financial projection of RWS casino performance for the 12 months period by above report is unlikely to materialize.  MBS has come into operation and would cannibalize the same pool of mass market from RWS.  The next two quarters will be a good gauge of whether the market is indeed much larger?

(3)  It is likely that under the currently tight regulatory regime in Singapore, both the casinos will try to “navigate” around the rules of the game on junket control, allowing junkets to disguise as “high-rollers” into casino premium programs without going through the required junket licensing process.  The rest, it is really up to the creativity of both parties (casino & junket).  But will this short-burst of front-money into a casino able to grow VIP business at all will very much depend on, turnover volume and sustainable credit flow.  Will the casino and junket take bigger risk exposure together?

(4)  We would think that the two IR casinos will soon come to their realization, that the only way to achieve viable EBITDA margines of above 35% can only be derived from volume operations on mass market efficiency.  



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