Inside Asian Gaming

Oct 2007 | INSIDE ASIAN GAMING 23 Supercasinos Genting Chairman Lim Kok Thay presents a model of his company’s upcoming Singapore resort its calculations for the 11% share of gross gaming revenue City of Entertainment pays its parent company Genting Berhad. DB says the resort generated US$432 million of EBITDA in 2006 (US$530 mil- lion before adjustments). City of Enter- tainment’s low operational costs and the fact 70% of Casino de Genting’s gaming revenue comes from the higher margin mass market rather than the lower margin VIP sector, means the Malaysian resort’s EBITDA margin is more than 50% (before management and licensing fee). First resort Integrated resorts may be the future, but almost by definition they are not cheap and cheerful. The average cost is at least US$1 billion, and experience so far in Asia is—not surprisingly—that the higher the capital spend and the longer the pay back period, the lower the return on invested capital. As IR capacity increases in Asia and the gaming market matures, operators, investors and bank- ers will be looking ever more closely at the numbers on new projects to make sure they make financial sense. Genting’s EBITDA mar- gins in Malaysia are largely the result of some very specific historical factors. It was one of the first if not the first integrat- ed gaming resort in the world. Work on cutting an access road to what had been a British colonial mountain resort be- gan as long ago as 1965, and the first hotel opened on the site in 1971, so it hasn’t faced the capital expenditure intensity of new build sites in Macau and Singapore. Asia still has a huge way to go before the IR and gen- eral gaming market matures, but investors shouldn’t hold their breath if they expect to see a financial performance on a par with Genting Highlands Re- sort any time soon. Integrated resorts may be the future, but almost by definition they are not cheap and cheerful. The average cost is at least US$1 billion, and experience so far in Asia is—not surprisingly— that the higher the capital spend and the longer the pay back period, the lower the return on invested capital.