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MBS’s 34% Decline In VIP Volumes Spells Gloom For Genting SP?
Hot Picks, Tradeable | 21 October 2014
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By: Tradeable
Articles (256)

Marina Bay Sand’s (MBS) parent company, Las Vegas Sands recently announced its financial results. Zooming into operations at MBS, we note that net revenues and operating incomes were both down for the third quarter of 2014. The poor operating figures from MBS could mean that things are not holding up well over at Genting SP’s Resorts World Sentosa (RWS).

Here’s What We Know:

  • VIP gaming volumes and win rates are down on BOTH a yearly and quarterly basis. On a yearly basis, VIP gaming volumes were down 33.8 percent from 3Q13′s US$13.8 billion to 3Q14′s US$9.1 billion. When comparing against the preceding quarter, VIP gaming volumes were down 12.7 percent. Overall VIP gaming revenue (after taking into account win rates) were even lower at US$240.8 million versus 1Q13′s US$364.4 million or a 33.9 percent decline.
  • Source: Las Vegas Sands, MBS operational performance

  • In the mass market segment, MBS has been seen as growing its appeal with its overall non-VIP gaming segment (Table and slot machines) growing by about 8.7 percent in total. According to Macquarie analysts, MBS has a mass market segment share of about 60 percent and could have strengthened its hold in 3Q14.
  • MBS put the blame of the poorer operating performance on the decline in Chinese tourists. According to the Singapore Tourism Board, tourist arrivals in 2014, year-to-date have declined by about 30 percent.
  • New gaming regions are opening up as new casinos commence operations in the Philippines and Korea. Japan is slated to add to this growing group of gaming destinations.

Japan is set to be another destination to compete with Singapore's gaming industry.

Tradeable’s POV

  • Genting’s gaming operations has a larger share of the VIP market in Singapore. The huge drop in VIP volumes over at MBS could mean that Genting SP’s gaming operations could also feel the heat. Macquarie opines that overall VIP gaming volumes could be down around 25 percent in 3Q14. However, the higher credit extension offered by RWS could soften this blow.
  • The higher credit extension cuts both ways though. Previously, Genting had made a large provision for bad debts. As an June 2014, Genting’s accounts receivables stood at about $1.2 billion. This could swell even further as investors keep a close eye on this.
  • With heavy headwinds blowing against Genting, we feel that the financial figures announced by LVS brings along a sense of foreboding as we anticipate Genting’s release of its 3Q14 financial results.
  • We are thus negative on that given the drop in operating performance by counterpart, MBS. Investors who are still invested in Genting should look for technical rebounds to offload the stock as the fundamentals of the stock does not seem to be able to support its price levels.
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Genting Singapore  0.900 +0.005 +0.56%   
Business: Develops, operates & mkts casinos & IRs globally, including Australia, M'sia, Philippines & UK. [FY18 Turnover] Gaming (66.1%), non-gaming (33.8%), others & invs (0.1%).

Insight: May-19, 1Q19, despite Co's non-gaming business reg... Read More

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