IRs seek revenue drivers as GGR stagnates

Record high tourism arrivals are not feeding through to the bottom line of Singapore’s two casinos, with gross gambling revenue expected to be flat for 2017.

With an absence of catalysts for further growth on the gaming side, Marina Bay Sands and Genting Singapore are expected to seek to boost their non-gaming activities and monetize assets, analysts say.

Fitch said in a recent note that Singapore government is unlikely to issue more licences as the returns on investment of new casinos are likely to be poor – given the weakened GGR and increased regional competition.

“Tourist arrivals and receipts – an important consideration for the government – have improved in 2016 with increased spending in shopping, accommodation and food & beverage, offsetting weakness in gaming.

A more likely scenario is for existing operators to be allowed to increase non-gaming capacity,” it said. For Q4, Marina Bay Sands posted better-than-expected profit, generating $723 million in revenue and $366 million in property EBITDA, topping the consensus for $718 million in revenue and $355 million in EBITDA.

Buckingham Research said the stand out performance in the quarter was an 8 percent increase in RevPar, helping to offset weaker gaming figures. VIP volumes fell 18.4 percent year-over-year in the final three months of last year, and mass volumes dropped 2.6 percent. VIP was up 13.8 percent sequentially.

However, it was management’s comments on a subsequent conference call that garnered the most attention.

The group confirmed it is in active talks to sell a stake in its Singapore mall.

About 49 percent could potentially be sold off in the first half of this year, with proceeds expected of about $3 billion to $3.5 billion.

Nothing is finalized, though the company said interest had been high and negotiations and due diligence are ongoing.

STC gets new head

The Singapore Turf Club has seen a change at the top, after long-time president and CEO Yu Pang Fey stepped down. Chong Boo Ching, who was formerly president of chemicals company DuPont Titanium Technologies, took over March 1. Yu joined the STC in 1988 as deputy general manager and rose through the ranks. Over the years, he played a crucial role in its development into one of the Asia’s best racecourses.

Runner up in gambling per capita losses

Singapore was listed as the runner-up in terms of gambling losses per resident adult in 2016, according to the Economist, citing research from H2 Gambling Capital. Gambling customers lost an average of close to $700 per resident adult in 2016, second only to Australia with about $990 per adult. 

For the overall market, Fitch is projecting flat GGR of about SGD$5.7 billion for this year, held back mainly by the weak VIP sector. That’s despite strong tourism figures, showing healthy growth in arrivals from mainland China.

While visitor arrivals grew 7.7 percent to 16.4 million in 2016, tourism receipts rose even higher, increasing 13.9 percent to SG$24.8 billion (US$17.5 billion) in 2016.

China ranked highest in tourism receipts, growing 41 percent year-on-year, followed by India, which grew 37 percent year-on-year, and trailed by Indonesia, which grew 14 percent year-on-year. “Tourism receipts from China increased mainly due to a volume-driven growth while Indonesia and India saw tourism receipts growing on the back of visitors spending more on shopping and accommodation,” said the STB.The number of visitors from China grew 36 percent year-on-year in 2016 while Indonesia and India grew 6 and 8 percent respectively, said STB. The tourism board estimates 2017 tourism receipts to hit between SG$25.1 and SG$25.8 billion, while international arrivals will stay relatively flat at 16.4 to 16.8 million in the year.

Despite the gains in Chinese visitation, Singapore’s VIP rolling chip volume had fallen 30 percent by end September, according to Fitch, while mass was down just 2 percent.

The two IRs have been making efforts over the past few years to reduce their reliance on the VIP sector, but have been held back by the strong Singapore dollar relative to regional currencies, which has made the island an expensive destination for some neighboring countries.

In its Q4 results, Genting Singapore posted revenue that rose 2 percent year-on-year to S$558 million, slightly below expectations.

Bernstein said in a note that the miss was due to a weaker-than-expected performance in its non-gaming segments. Net gaming revenue came in at S$399 million, up 7 percent while while non-gaming revenue weakened to $159 million, down 8 percent as visitation to attractions declined. The main thrust of the company’s conference call with analysts was its ambitions for Japan rather than any new initiatives to drive growth at home.