GGRAsia – GEN Singapore might gain from stronger ringgit: Maybank

GEN Singapore might gain from stronger ringgit: Maybank

Jan 19, 2018 Newsdesk Latest News, Rest of Asia, Singapore, Top of the deck

Resorts World Sentosa might regain market share in the Singapore casino gambling market at the expense of duopoly rival Marina Bay Sands due to the strengthening of the Malaysian ringgit versus the Singapore dollar, says a report from Maybank IB Research.

On Wednesday it was reported that the currency of Malaysia – a country neighbouring Singapore and that supplies many of the gamblers that visit the city-state’s casino resorts – had been trading as high as MYR3.00 (US$0.762) per Singapore dollar; the strongest for 14 months.

Maybank issued a detailed memo outlining the prospects in 2018 and beyond for Genting Singapore Plc, the operator of Resorts World Sentosa (pictured); its sister firm Genting Malaysia Bhd which runs Resorts World Genting in Malaysia; and their parent, Malaysian conglomerate Genting Bhd.

Maybank said its research suggested Resorts World Sentosa operating performance had a strong correlation – in terms of VIP gambling volume and mass-market casino gross gaming revenue (GGR) share – to the Malaysian ringgit-Singapore dollar exchange rate.

“We understand that this is because Resorts World Sentosa has more Malaysian gamblers than Marina Bay Sands due to its Genting heritage,” wrote Maybank analyst Samuel Yin Shao Yang.

“As the Malaysian ringgit-Singapore dollar rate has been recovering, we can expect Resorts World Sentosa to regain market share in the near future,” he noted.

But Mr Yin added: “For now, we continue to assume that Resorts World Sentosa will command 37 percent VIP volume share and 39 percent mass-market GGR share in financial year 2018 and financial year 2019.”

The analyst stated, referring first to a branded theme park at Resorts World Sentosa: “We also do not discount the possibility that Resorts World Sentosa may sell its stakes in Universal Studios Singapore and its hotels this year.”

“Recall that the ban on Resorts World Sentosa and Marina Bay Sands from selling stakes in their non-gaming assets was lifted in April 2017.” Marina Bay Sands is run by a unit of U.S.-based Las Vegas Sands Corp.

Japan opportunity

Genting Singapore recently raised fresh funds via issuance of publicly-offered Japanese yen-denominated bonds.

“Genting Singapore has regularly expressed interest in bidding for a Japanese casino licence,” said Maybank’s Mr Yin in his Wednesday analysis.

“We gather that the problem gambling bill and Integrated Resort [IR] Implementation Bill may be passed in the Diet [parliament] this year to liberalise the Japanese casino industry; and request for proposals will be called for soon after,” he added.

In commentary on other developments, the analyst said he was not “overly concerned” about the possibility of a market-wide hike in the percentage rate of Singapore’s Goods and Services Tax (GST) – which is levied on casino gambling as well as other services.

“Of late, there has been a lot of speculation in the Singaporean press whether the GST rate will be hiked from 7 percent to 9 percent in the upcoming Singapore budget 2018 that will be tabled on 19 February 2018,” stated the Maybank analyst.

Even if that happened, “all else being equal, we estimate that our earnings estimates will be trimmed by merely 4 percent per annum, assuming that Resorts World Sentosa absorbs the additional tax,” wrote Mr Yin.

“In fact, we estimate that this negative impact can be cancelled out entirely by Resorts World Sentosa regaining a mere 1 percentage point of mass market GGR share,” he noted.

Although Genting Singapore has not reported its fourth-quarter 2017 earnings yet, Maybank estimates full-year 2017 revenue to have been nearly SGD2.42 billion (US$1.84 billion), and thinks 2018 revenue will in likelihood rise 2.2 percent year-on-year, to SGD2.47 billion.

The institution expects Genting Singapore’s full-year 2017 earnings before interest, taxation, depreciation and amortisation (EBITDA) to be just over SGD1.19 billion, and for 2018 EBITDA to rise 0.84 percent year-on-year to circa SGD1.20 billion.

“While Genting Singapore’s earnings recovery was largely driven by cost rationalisation in 2017, we expect it to be largely driven by VIP market recovery in 2018 instead,” stated Mr Yin.

In commentary on Genting Malaysia, the analyst stated: “After three consecutive quarters of poorer-than-expected earnings, we are hopeful that Genting Malaysia will deliver fourth-quarter 2017 earnings that will be within our expectations.”