Inside Asian Gaming

INSIDE ASIAN GAMING | October 2011 12 Source: Companies, CLSA Asia-Pacific Markets Macau—Win per mass-market table Macau—Win per VIP table Source: Euromonitor, CLSA Asia-Pacific Markets Per-capita gaming spending Per-capita gaming / leisure-spending growth (compared with our base-case estimate of US$108 billion), while industry Ebitda can increase to US$35 billion (US$28 billion) in end-2020. Highly profitable industry High net win per table or average spending has translated into high returns for Macau’s casinos. Only Singapore betters Macau in casino Ebitda, due to its much lower gaming tax (12-22% versus 39% in Macau). We project the Singapore operators, Resorts World Sentosa (RWS) and Marina Bay Sands (MBS), to deliver property Ebitda of US$1.6 billion and US$1.4 billion, respectively, in 2011, and US$2 billion over time. Macau’s top-performing casinos are making close to US$1 billion, while the most profitable Las Vegas casino, Wynn, earns close to US$500m. Macau casinos are superior in terms of return on invested capital (ROIC). Sands Macao, the first American-built casino in Macau, has the highest ROIC of 133% in 11CL. Other properties on the Macau peninsula, including Grand Lisboa, Wynn Macau and Starworld generate ROIC of more than 60%. Singapore casinos are much less, at 27-28%, due to their higher construction cost (Marina Bay Sands at US$6.5 billion and Resorts World Sentosa at US$5.5 billion). Growth in earnings outpacing that in topline We expect Macau casinos’ Ebitda to grow at a quicker pace than the overall gaming revenue. For the next decade, we project a 16% Cagr in gaming revenue but 23% and 29%, respectively, in Ebitda and net income. Drivers of the robust earnings growth include: • Casino operators’ strong pricing power amid limited supply and the low possibility of commission wars given the favourable industry dynamics. • More targeted and cost-effective marketing and rebate programmes. • Improved revenue optimization of the available gaming space and tables, including a better mix between VIP and mass-market tables; more precise segment of differentiation among various customer types (mass, premium- CLSA Market Outlook