Inside Asian Gaming

July 2012 | INSIDE ASIAN GAMING 13 that it would allow a first batch of junket promoter licenses to two Malaysian groups. In doing so, the CRA rejected 12 other applications. Analysts view this is as baby steps that could lead to bigger strides in future. “The junkets approved are much smaller than the ones operating out of Macau, so the incremental revenue from them might not be that significant,” says CLSA analyst Richard Huang. “But going forward, with the approval of more junkets, the incremental gaming revenue could be more material.” “The first two junkets to be licensed are relatively small by industry standards and it will take some time for the market to show growth from this policy initiative,” agrees HSBC’s Sean Monaghan in a 26th March research note. Thomas Arasi, former CEO of Marina Bay Sands and now president and CEO of Harbinger Advisers suggests the Singapore government is only likely to issue further licenses to junkets that resemble “travel agents on steroids,” rather than Macau-style junkets who extend credit to players from mainland China and collect debts through grey channels. Mr Monaghan is optimistic about further approvals, though. His growth projections for the market include assumptions of medium and large junkets—targeted at different parts of Asia—being licensed and entering the market. “We estimate that by the end of 2015, there will be 44 junkets licensed and operating in Singapore (16 small, 16medium and 12 large), producing a combined monthly roll of S$4.5 billion,” he writes. MBS has so far not endorsed any junket applications, with the current batch all coming from RWS. Genting Singapore will undoubtedly be hoping that its two approvals will give it some serious return on investment. It reported a 31% dip in net profit during the first quarter of 2012—as compared to a 51% higher net profit at MBS during the same period—which Genting put down to lower gaming revenue and depreciation after the opening of new hotels and attractions. Revenue at RWS is likely to also get a boost when the west zone of the complex is completed—likely to occur before the end of this year. The west zone will include the Equarius Water Park and the Marine Life Park attractions. MBS too will likely benefit from the opening of the nearby Gardens by the Bay development, the first stage of which was officially open to the public on 29th June. And while Genting has blazed the trail for junket applications, Sands could also dip its toe into a strategy it already utilizes effectively in Macau. But impact from non-gaming attractions and junket approvals remain relative uncertainties, especially when compared to the persistent uncertainty in the eurozone and the slowing Chinese economy. And the high occupancy levels at hotels Singapore- wide make it painfully clear that the city state needs to rapidly develop its basic tourist infrastructure. Vacant land around Marina Bay could be developed into additional hotel rooms and a third casino license could be awarded after the exclusivity of the current two licenses expires in 2016, but these developments are still distant and very uncertain. Until the headwinds of insufficient hotel rooms and global economic uncertainty are resolved, growth inSingaporecasinos is likely to remain far more muted than it has been over the past two years. Long-term gaming demand in Asia looks healthy, however, as does Changi’s position as an international aviation hub and Singapore’s attractiveness as a tourist destination. Although the Singapore gaming market is healthy enough to continue generating substantial profits—MBS remains the most profitable casino resort on earth and RWS ranks high on the list—it lacks impetus to keep growing at a rapid clip. The potential for more stellar growth remains, though the question of whether it will be tapped appears to be in the hands of regulators and policy makers both inside and outside the city-state. Aviation hub—Singapore’s Changi Airport is consistently voted one of the top airports in the world Further attraction—the first phase of Gardens by the Bay, to the left of Marina Bay Sands, opened 29th June Market Outlook