The decision by Genting Singapore management to pivot its Resorts World Sentosa expansion plans to a more premium offering has been described as ROIC-positive, despite the move contributing to a significant increase in development costs.
As reported by Inside Asian Gaming, Genting Singapore announced Friday that it had approved an increase in its total investment into RWS 2.0 from the original SG$4.5 billion (US$2.9 billion) first planned in 2019 to SG$6.8 billion (US$5 billion).
In a Monday note, Nomura analysts Tushar Mohata and Alpa Aggarwal observed that the cost increase was in part attributable to higher commodity and labour costs over the past few years, but also to the more premium offering Genting Singapore is now targeting, having opted to develop a lower number of more premium suites versus a higher number of rooms in the original design.
However, they added, “ROIC from a more premium product should also be higher, as seen in recent Marina Bay Sands results after their hotel suites were launched.”
Also encouraging given this high-end focus is the fact that Genting Singapore’s 3Q23 results comfortably beat market consensus, largely due to enhanced marketing efforts in the VIP space.
Significantly, Nomura estimates that RWS achieved 51% market share in VIP rolling chip for the quarter due to more aggressive marketing efforts, events, and relationship managers catering to this segment.
“VIP marketing efforts such as a bespoke commission program, for the high-end VIP customer base from north Asia, helped boost gaming revenue,” the analysts wrote.
“VIP rolling chip volume grew 65% quarter-on-quarter and hold percentage was just slightly above normal at 3.19%. Non-gaming revenue strength came from summer holiday visitors from Greater China, India, ASEAN and Australia.”
Mass market share was more subdued at 33%, leaving RWS with overall GGR market share of 40% in Q3, according to Nomura.
Nevertheless, Mohata and Alpa Aggarwal said they expect the market to react well to the company’s results when trading resumes on Tuesday following recent investor concerns over the VIP market – especially due to the widening Singapore money-laundering asset seizures – and a weakening China macro.
“In our view, 3Q23 results should dispel these concerns and reaffirm the view that both gaming/non-gaming revenue growth story from gradual visitation improvement is still intact,” they said.
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