On Wednesday night in the U.S, Marina Bay Sands’ parent company Las Vegas Sands reported results that were better than consensus. After analysis of the result, Macquarie Equities Research (MER) believes that MBS now has a lead over Genting Singapore particularly in the mass market segment and that the latter may see a large decline in volumes.

Below are excerpts from the MER report on Genting Singapore released 16 October 2014:
 
VIP volumes down significantly by 34% year-on-year (YoY); lowest since 2010: In MER’s view, MBS’ VIP volumes in 3Q14 could send panic signals in the market. MBS did VIP volumes of only US$9.1bn in 3Q14 vs US$13.8bn in 3Q13. This is the lowest level since the start of 2010. In the first 9 months of 2014, MBS’ VIP volumes are down 30% year-on-year (YoY).
 
Decline in Chinese tourist arrivals are having a big impact: MER believes that more than 50% of the VIP volumes in Singapore casinos are made up by Chinese players. The 30% decline in tourist arrivals in 2014 year-to-date is having a big negative impact on VIP roll.
 
Singapore is not that attractive to VIPs with new regions opening up: MER thinks the advent of new casinos in the region – Korea and Philippines – has taken away some of the VIP volumes from Singapore, a trend that will likely continue with more casinos in the region.
 
GENS could also report a big decline in VIP roll in 3Q14: Driven by higher credit extension, MER believes Genting Singapore absolute VIP volume numbers will be higher than the US$9.1bn MBS has reported. Even if MER assumes Genting Singapore will take a 60% market share in VIP, its volumes will be down at least 17% YoY.
 
Overall SG VIP gaming volumes could be down around 25% in 3Q14: This will be a big setback for investors who are still building growth in SG gaming market. MER believes that the SG gaming market has matured and runs the risk of disappointing bullish expectations.
 
Further bad news for GENS – MBS grows its “mass market” volumes: MBS mass market volumes (tables + slots) came in at US$4.3bn, a 9% YoY growth. MBS has a lead over Genting Singapore in the mass market segment with a 60% market share, and could have strengthened its hold in 3Q14, in MER’s view.
 
Action and recommendation
Hopes on SG gaming market growth quashed; Street to downgrade: MER believes the de-rating for GENS’ earnings is still only halfway and most of the street will now have to taper expectations from the local gaming market. MER expects Genting Singapore’s stock price to remain under pressure and decline another 6.5% from current levels. MER has a Underperform rating on Genting Singapore with a 12-month price target of $1.

Source: Macquarie Research - 17 Oct 2014