Singapore Casino Pie Cannot Grow Bigger?

Posted: August 12, 2011 in Uncategorized

12 Aug 2011 FRI

EXPERT Commentary on News Extracts

SINGAPORE: The honeymoon may be over for Singapore’s casinos.

(Extracts of report from CNA)

Revenue growth is projected to slow in the second half of 2011, after a year-and-a-half of booming growth that exceeded most government and private forecasts.

Analysts say the industry has grown fast, but now has little room for expansion.

The explosive start to Singapore’s casino experiment was never expected to last.
UBS estimates market revenues in the second quarter were flat compared to the first quarter, and they’re unlikely to return to the lofty levels of a year ago.

SIAS Research investment analyst Liu Jinshu said: “When the integrated resorts first came out, we had high expectations. One year down the road, I would say we can no longer expect things like 50 per cent, 100 per cent growth rates.”

Marina Bay Sands raked in nearly US$738 million or 30 per cent of Las Vegas Corp’s revenue in the second quarter this year.  Citigroup said such strong quarterly earnings may indicate mass-market erosion for Genting Singapore’s casino, which has an estimated 60 per cent of market share.

Market share between the two IRs is expected to equalise in 2012.
Galaviz & Co chief economist Jonathan Galaviz said: “There (are many) pundits that have the view that the Singapore market is becoming mature… because there is a finite capacity – there is only so much casino gaming space in the integrated resorts where you can have only a limited increase in gaming revenue.

“The strategies of the senior management team focusing on the non-gaming pieces are really going to be, I think, where a lot of the positive, upward performance potential remains in the company.”

Genting Singapore, whose stock is down about 25 per cent from its peak in April, is expected to post a drop in quarterly profit of about 25 per cent from a year earlier, when it reports Friday.

-CNA/wk

————————

EXPERT Commentary:

It is not surprising that most analysts are now looking at Singapore IR casinos with cautious mood. 

Currently, Singaporean locals are contributing up to 40% of total casino revenues to the two IR casinos.  That’s to say, foreign visitors / patrons wager volume is much lower than what originally projected. 

The casino mass market mainly consists of Singaporean locals and Malaysians.  These two segments are slowing down in wagering… due to slack that indicates two factors:  (1)  frequency (trips) to casino is not increasing as a whole, (2)  wager average has not increased.  Therefore, the two casinos’ Hold % continues to stay flat.  From the recent announcement of 2nd quarter result, most analysts thought that this is a clear sign of Marina Bay Sands has cannibalized Resorts World Sentosa mass-gaming market share.

The only way to “save” the slowing down of casino revenue state of affair is, that the casino authority (CRA) starts to open up the floodgate for enough junket operators to serve as an effective platform for money flow (into the casinos).

The saving grace for MBS and RWS is that the two operators manage to maintain their Ebitda margins so far.

Our expert panel envisagesd that IR casino revenue growth for the next few years amidst slow-moving economic environment, is likely to be within 15 – 18% net growth if the “iron door” for junkets remains closed.

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