Uneventful 3Q13 at MBS
Marina Bay Sands (MBS) had yet another business-as-usual quarter with both its VIP and mass GGR growth capped by the availability of credit and regulated local access respectively.
We expect Genting Singapore (GENS) to mirror the same structural issues.
No change to our EPS though we roll forward our RNAV-based valuation, which lifts our target price. Although its Japan opportunity is positive, we believe its share price has factored in the bulk of the option value. Underperform maintained, with de-rating catalysts expected from continued low GGR growth.
MBS released its 3Q13 operating numbers which threw up no surprises. GGR came in at US$807m, up 30% yoy because of a normalisation of VIP hold rates to 2.85% (1.79% in 3Q12). Qoq, the numbers largely reflected the same business levels as in 2Q13. VIP rolling chip was down 4% qoq to US$13,785m. Non-rolling chip on the mass floor was down 1% to US$1,156m. Receivables remained above the US$1.1bn mark. MBS’s forward strategy is to focus on the foreign premium mass segment with some margin pressure expected as the casino pays for the rooms. Management also talked about its IR opportunity in Japan and expects this to be “the single most expensive” investment, especially with construction costs expected to go up in the lead-up to the 2020 Olympics.
What We Think
We expect GENS to report similar uninspiring 3Q13 numbers on 7 Nov. GENS has rallied recently on the back of its chances in Japan which admittedly are more than good. It has been ahead of the curve in engaging with potential partners and the potential landscape. We also believe the Japanese will lean towards the Singapore IR model, which is capex-heavy and regulation-heavy. We are positive on GENS and Japan but would not be over-enthusiastic on the option value. If the Japanese want the same Singapore model, then ROCEs could potentially be low.
What You Should Do
Singapore IRs generate among the lowest ROCEs in the region because they have the highest capex per table of US$8.7m. Their Macau peers generate the highest ROCEs despite a 40% tax rate with a capex per table of US$5.7m. Stay invested in Macau; we prefer Genting Hong Kong.
Publish date: 18/10/13