No new licenses forthcoming
Singapore’s casino industry, which opened to great success just six years ago, is battling a long-term slowdown. According to the website Bestthenews.com, Marina Bay Sands, a Las Vegas Sands property, has seen revenues decline on a year-on-year basis for the last five quarters. Across town, its only rival in the jurisdiction, Genting Singapore’s Resorts World Sentosa, has posted declines for seven full quarters.
Grant Govertsen, analyst for Union Gaming Asia, cited “the same factors impacting Macau—namely the anti-corruption drive and a slowing Chinese economy” as key factors in the downturn. “In addition, currency weakness from Indonesia and Malaysia relative to the Singapore dollar is a contributing factor,” he said.
VIP revenues dropped by about 30 percent year-on-year in 2015 at the two integrated resorts, said CIMB analyst Jessalynn Chen. Resorts World Sentosa has been harder hit because it is more reliant on Chinese VIP customers.
RWS “has taken a hit from the anti-corruption drive both in terms of lower VIP rolling chip volume and also higher bad debt charges,” while Marina Bay Sands is stronger in the mass gaming segment.
In the most recent quarter, MBS reported an EBITDA margin of 45.5 percent, versus RWS’s 33.1 percent. Gabriel Yap, executive chairman at investment firm GCP Global, said RWS has been “focusing more on the high rollers, and that’s what got them into dire straits—the provisions (for bad debts). They have had to write off S$200 million worth of bad debts over the last 12 quarters.”
Those debts are in part due to a crackdown on junkets, which are no longer allowed to lending VIPs money to gamble. The casinos have had to pick up the slack, and extend credit to the customers. As a result, RWS has also begun to pivot toward the mass market. Chen expects margins for the Malaysian-controlled casino to improve in the second half of this year.
She said Singapore “remains an attractive gaming market, especially in the mass segment. Visitor arrivals to Singapore are also encouraging, growing 13.8 percent year-on-year in the first quarter of this year. “While the quality of visitors has fallen in terms of average spend and length of stay, the volume growth should still have a positive impact on the mass gaming business,” said Chen.
Govertsen agrees. “Eventually we should see EBITDA margins begin to approach 50 percent again. The reality is that Singapore is still one of the biggest gaming markets in the world, and in that sense is very viable.”
Next year, the exclusivity period for MBS and RWS will expire, but the government has already said it has no plans to make a third license available.
