Inside Asian Gaming

INSIDE ASIAN GAMING | May 2010 24 is too bearish on Macau’s rapid earnings growth, we believe that consensus have underestimated the potential of Singapore’s gaming market,” adds the report. CLSA stresses that its position is based on its own experience from a day-long visit to both properties spread across different times of the day, combined with anecdotal evidence from other sources. As such, CLSA doesn’t claim its assessment to be entirely scientific, but regards it as a reasonably educated view based on available information and comparison with trends in Macau and other Asian gaming markets. “We think it is too early to extrapolate early performance of both casinos, especially as we believe growth will accelerate quite quickly over the first few years. Given uncertainty about timing of the openings for both IRs and as not all of the IR products are open, we believe a significant number of tourists have delayed holiday bookings. Also, some will book visits after some of the initial teething problems are ironed out. As a reminder, Macau gaming revenues have grown by around 30% per annum for the last six years; and the US and Australian gaming grew by between 10-15% per annum for more than ten years post-opening,” state the analysts. Methodology “Nonetheless, CLSA conducted a simple study to gauge the performance of the MBS casino versus the RWS casino. We visited the MBS casino on 1st May 2010, at 2pm, 6pm and 10pm. We spent about 1.0–1.5 hours each time at the casino and immediately then went over to RWS and spent about 0.5 hours each time to gauge the business in comparison.” The authors cite as evidence in support of their bullishness their witnessing of resilience in Resorts World Sentosa’s mass- market performance in face of competition from MBS. “RWS mass-market gaming continues to impress. Anecdotally, the RWS casino has not seen any decline of foot-traffic and table drop since the five days of MBS opening. In much similar fashion to Genting Highlands resort in Malaysia, RWS is starting to build a loyal base of mass-market customers. We expected a decline of [RWS] customers in the first week of MBS opening, and have been wrong,” say the CLSA analysts. They issue a note of caution, however, on RWS’s mass market performance in coming months. “We still expect cannibalisation to happen in the mid-term, and think it’s a matter of time.” The authors did note Resorts World Sentosa’s high limit tables appeared to be performing better than they had expected. “RWS VIP could surprise consensus on the upside. With over 170-210 tables dedicated to VIP now across Crockfords and Maxims Club, our recent visit to the VIP floor suggests that the foot-traffic and gaming appetite could surprise the market on the upside. RWS is currently embarking on an expansion renovation at Maxims Club to include more rooms as the VIP tables are running at high capacity. We estimated VIP to be 37% of overall revenues.” CLSA added, however: “We view the hardware of the RWS VIP as disappointing.” The authors said they were unable to draw comparisons between RWS’s high roller offer and that of Marina Bay Sands during their trip. “We were not privy to observe the performance of the VIP floors during our trip. As Sheldon Adelson [the LVS Chairman] has stated the strategy of not engaging junkets, we expect all VIP business to be direct. We have not formed any views on this segment of the [MBS] business, but are inclined to Resorts World Sentosa—still very busy despite MBS opening CLSA forecast for RWS (gaming) Source: CLSA Asia-Pacific Markets CLSA forecast for RWS (gaming and non-gaming) Source: CLSA Asia-Pacific Markets Market Outlook

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