Inside Asian Gaming

COVER STORY acquire more premium-mass customers will have little near-term impact. As he explains,“With the local Singaporean market essentially maxed out, the focus on Malaysia and Indonesia continues—however, we believe that a significant portion of the high-value customers are likely already penetrated.” WhereasMacau is acknowledged to have only served the tip of the iceberg of available gaming demand from mainland China, given the constraints placed on gaming growth in Singapore by government policy and directives, the latter market has already achieved a fair degree of penetration. The city-state’s government is also highly unlikely to soften its stance on these issues any time soon, from the casino entry levy on residents and injunctions on marketing to locals, to the effective ban on junkets and the reluctance to either allow the existing operators to expand their capacity or let new ones in. If anything, the government’s latest comments and initiatives suggest policy risk is on the downside. Still, with annual hold-adjusted EBITDA at both Resorts World Sentosa and Marina Bay Sands hovering well above the billion-dollar mark, it’s not such a bad place for a casino operator tobe. In the latest quarter, theUS$5.7 billion MBS recorded in adjusted EBITDA is more than three times greater than that of Las Vegas Sands’ newest Macau property, the US$4.2 billion Sands Cotai Central, even though the former had suffered an unlucky quarter in the VIP sector, while the latter had a lucky one. So if return on investment is a key consideration in assessing a property’s success, Singapore’s plateau could arguably have Macau’s growth beat. Singapore Quarterly Mass Volume and Growth Source: Company data and J.P. Morgan estimates 700 30% 35% Mass revenue (LHS) yoy growth (RHS) 25% 20% 15% 10% 5% 0% -5% (S$ m) 600 500 400 300 100 200 0 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Singapore Quarterly Slot Revenue and Growth Source: Company data and J.P. Morgan estimates 350 100% 120% Slot revenues (LHS) yoy growth (RHS) 80% 60% 40% 20% 0% -20% (S$ m) 300 250 200 150 50 100 0 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 Limiting Visits by ‘Vulnerable’ Locals A mendments to Singapore’s Casino Control Act made in November 2012 contained provisions for new safeguards to mitigate the negative social impacts arising from the introduction of casinos to the city-state. Among these are a newmeasure which came into effect on 1st June that seeks to limit the frequency of casinos visits by so-called “financially vulnerable” Singaporeans and permanent residents. The visitation limits can be either voluntary or imposed at the request of family members or enforced by a committee appointed by the National Council on Problem Gambling. Analyst Grant Govertsen of Union Gaming Research Macau believes the government may intervene when a financially vulnerable local is found to visit casinos between six and 10 times a month. He points out that“Singapore has likely already identified and excluded many of the country’s most vulnerable persons and problem gamblers.”He adds that the new regulations“limit, rather than exclude, an individual’s casino visitation frequency and can be viewed as a softer approach to problem gambling.” “While we believe that there will be some number of persons who are impacted by this new regulation, we believe the impact to total resort revenues is likely to be nominal,” he says. we believe will remain so for the foreseeable future,” says analyst Grant Govertsen at Union Gaming Research Macau. While Mr Govertsen does see room for margin improvement in the mass segment, he believes the casinos’ current efforts to 16 INSIDE ASIAN GAMING | June 2013