RWS mass market model clouds outlook

Wednesday 19th of August 2020

Resorts World Sentosa’s business model, which is skewed towards catering for the mass market, means it’s not likely to recover any time soon and not without a significant easing in travel restrictions, according to Union Gaming.

Parent company, Genting Singapore saw a 94 percent drop in Q2 revenue, adding on to a 37 percent decline reported in Q1. It reported a Q2 EBITDA loss of $85 million.

The firm points out that historically, international travellers have accounted for 75-80 percent of visitation at RWS. Border restrictions are gradually being eased, but not on the scale that would allow for a large-scale resumption of visitation.

“While the company’s cost rationalization efforts will help reduce EBITDA and cash burn, the fact that RWS was built for the masses will make it much more difficult to build a sustainable recovery without a significant return of international travel,” analyst John DeCree wrote in the note.

“Although locals comprise about 25 percent of visitation to RWS prior to COVID, ongoing restrictions on the casinos and its guests continue to limit local visitation, making even a 25 percent revenue recovery at the property challenging in the near-term.”

On the upside, Union Gaming notes that it sees limited downside in the share price from here as the company has a strong net cash position and very little debt. It has also taken significant measures to reduce costs.