Inside Asian Gaming

February 2012 | INSIDE ASIAN GAMING 7 further impetus for growth. According to CIMB, “Marketing programmes for RWS will likely be more restrained until its accommodation constraints are relieved and the West Zone is completed, which we expect in 2H 2012. The marketing team will then have more complete products to market. “As such, we believe RWS has yet to reach its full potential, with sufficient accommodation, more complete product offerings and a boost from the company’s marketing efforts. “It is arguably difficult to quantify the boost to gaming demand and earnings from these new non-gaming amenities. But even more comprehensive integrated resort offerings should help draw in more visitors, which in turn could translate into higher casino patronage and gaming revenue. “We gather that Genting Singapore has been relatively unaffected by the extension of the scope of Casino Control (Advertising) regulations on promotions. Even before the extension, all promotions had to be vetted by the authorities. With the recent measures, there are in fact more certainties on the ‘dos and don’ts’ of promotions. “Genting Singapore will be releasing its 4Q11 results on 22 Feb. Non-gaming revenue should be boosted by the launch of new attractions and year-end holiday season. “On the flip side, gaming revenue, particularly in the VIP segment, might still be impeded by a lack of accommodation given delays in the opening of Equarius Hotel and the beach villas and Genting Singapore’s still-cautious lending policy. As such, we flag the risk of a results shortfall. Our current FY11 EBITDA projection of S$1,750m implies a 4Q EBITDA of S$498m.” Macro view While the two IRs will continue their tussle for market share dominance, the consensus view is the pie as a whole will continue to get bigger. Singapore’s gross gaming revenue is forecast to grow from around US$6 billion in 2011 to a range between US$6.6 billion (according to CLSA Asia-Pacific Markets) and US$7 billion (DBS Vickers Research) in 2012. DBS Vickers Research notes its forecast does not include the potential impact of junkets, explaining “While junkets could lead to potential cannibalisation of the direct VIP segment and lower margins due to commissions, these should be mitigated by stronger volume growth and lower receivable provision/ impairment.” Both IRs will also continue contributing to Singapore’s tourism growth. In 2010, the year the IRs opened, Singapore’s visitor arrivals rose 20% year-on-year to a record 11.6 million, reversing declines of 4% and 2%, respectively, in 2009 and 2008. Visitor expenditures rose 49% in 2010. “Perhaps 25% of tourism growth is from the IRs,”HSBC senior gaming and consumer analyst Sean Monaghan estimates. Tourism data for 2011 show additional rises of 13% for arrivals to 13.2 million and 17% for expenditures to S$22.2 billion. Revenue from the sightseeing and entertainment sectors, which includes gambling, soared 37% to S$5.5 billion. The growing visitor numbers also underlie the double-digit increase in hotel rates and average revenues despite some 4,000 rooms being added to supply. Notably, Singapore’s tourism figures do not include arrivals via its land border with Malaysia, which likely grew by much more, with Malaysians constituting the largest group of non-local players at the IR casinos. Mainland Chinese players are also prominent in themix. Following the opening of the IRs, the number of mainland Chinese visitors descending upon Singapore has spiked. In 2010, the number of mainland Chinese visitors to Singapore jumped 25.0% to 1.17 million, reversing a 13.2% decline in 2009. In 2011, the number of mainland Chinese visitors soared 34.7% further to 1.58 million. Mainland Chinese now constitute the second biggest group of visitors (ex- land border) to Singapore after Indonesians, who numbered 2.59 million in 2011 (a 12.4% year-on-year increase). Shaping up—construction progress on Equarius Water Park as of December 2011 Blockbuster attraction—The Universal Studios Singapore theme park at RWS now boasts the world’s first Transformers:The Ride Cover Story