Seaport Research Partners has suggested that the reported impact from an increase in baccarat hold rates at Marina Bay Sands (MBS) may be ‘highly over-stated.’
According to Las Vegas Sands‘ 2Q24 results, released on Thursday, the hold impact for MBS was reported as $64 million for the quarter. However, Seaport argues that this figure is inflated. They attribute the higher hold rate to an increase in side bets, which raises the casino’s edge, rather than an actual improvement in baccarat performance. This trend is observed not only in Singapore but also, to a lesser extent, in Macau.
In its latest investment memo, Seaport notes that they have already flagged this trend in the past, stating that it ‘should benefit not only MBS but most operators in Macau as well.’
The Las Vegas Sands’ 2Q24 results show that the VIP baccarat hold rate at MBS has averaged over 4 percent over the past four quarters, compared to less than 3.5 percent in 2018-2019.
Seaport highlights that MBS continues to perform well, with GGR rising 10.4 percent year-over-year in 2Q24, revenues increasing by 9.8 percent year-over-year, and property EBITDA up 18.5 percent year-over-year. While there was a decline quarter-over-quarter, Seaport attributes this to ‘normal seasonality.’
For 2024, Seaport senior analyst Vitaly Umansky forecasts MBS will deliver over $2.1 billion in property EBITDA on $4.26 billion in revenue, marking ‘its best year by far, as the newly renovated Towers 1 & 2 continue to drive more premium, higher-value business.’
Umansky adds, ‘MBS should continue to improve as new suite products come online during the second half of this year and early next year. While the overall room count shrinks, better higher-end suites have proven to drive incremental profitability.’
Once the room base of Towers 1-3 is completed, room rates are expected to exceed $800, with the property operating at over 95 percent occupancy.
For long-term development, Seaport notes that Marina Bay Sands Phase 2 is still several years away. ‘Sands will likely provide an update on the development plan with the Q3 results, and construction will likely begin in 2H25.’
‘To be funded with property cash flow and additional debt, we expect Phase 2 to cost over $7 billion (including the $1 billion already paid for the land), with the potential to deliver mid-teen ROI. We anticipate Phase 2 to open in 2030.’
Once completed, MBS is expected to deliver well over $3 billion in EBITDA, up from $1.86 billion in 2023.
