Inside Asian Gaming

September 2012 | INSIDE ASIAN GAMING 59 Feature profitability, and their fortunes relative to each other have ebbed and flowed. Resorts World Sentosa opened its doors on 14th February 2010, on the first day of the Chinese “Year of the Tiger,” and the 49-hectare, US$4.3 billion resort created an immediate buzz and was profitable from the get-go. It pulled in S$860.8million (US$687.4 million) in revenue in its first full quarter. Hotel occupancy reached 70%. And Genting Singapore’s group profits amounted to S$397 million. The project was so successful the group decided to divest its UK operations and focus on large-scale integrated resorts in Asia instead. Marina Bay Sands opened to similar fanfare on 27th April that year and generated US$94 million in earnings during its first 65 days of operations. LVS originally said it expected to recoup its US$5.5 billion investment within five years, aiming for more than $1 billion in earnings before interest, tax, depreciation and amortization (EBITDA) on an annual basis. This was above and beyond the expectations of analysts, the most optimistic of which topped out somewhere around the $800 million mark. Sheldon Adelson, chairman and chief executive of LVS, said he expected the property to be a “slam dunk home run”. And so it was. In its first quarter of operations it took in US$485.9 million in revenue. (The company’s revenue in its home base of Las Vegas was only $290.7 million over the same period.) EBITDA for the quarter came in at $241 million, roughly on track to hit Mr Adelson’s $1 billion goal. In fact, six months after the casino opened, it was generating revenue of $8.4 million per day. But while both casinos were profitable immediately—and their operators were optimisticaboutrecoupingtheirinvestments fairly quickly—total earnings, especially when looking at EBITDA, have not been evenly split between the two. Initially, Resorts World outperformed Marina Bay Sands, but in the two years since, MBS has overtaken its rival, and although both casinos took an earnings hit in the most recent quarter, MBS now appears to be growing more robustly. Shifting Momentum Genting Singapore reported EBITDA of S$311 million in the second quarter of this year, compared with S$345.8 million during the same quarter a year prior, or 17.4% less. The non-gaming side performed well. Hotel occupancy was at an all-time high of 92%. But gaming revenue took a hit, which the company blames on the economic slowdown in Asia. Core net profit of S$393.6 million over the first six months was down 27% year on year, and revenue of S$1.5 billion was down 9%. Second-quarter EBITDA and the 44% EBITDA margin were the weakest on record. “A lot of effort put in, but not much to show for it,”writes Maybank Kim Eng analyst Samuel Yin in an August report. “The two new IMAs [International Market Agents that are holding junket promoter licenses issued by the Casino Regulatory Authority of Singapore] (since March 2012) and the new Equarius Hotel & Beach Villas (since February 2012) failed to lift VIP volume. [Genting Singapore] attributed this to a poor economic environment. Coupled with 1,300 new employees to staff the Marine Life Park, which is expected to open by year-end, margins are expected to remain subdued for the next two to three quarters.” LVS also had a disappointing second quarter. It said that its hold fell across its Las Vegas, Macau and Singapore casinos. And higher provisions for bad debts also took a chunk out of its profitability, especially in Singapore, where it provides a great deal of credit directly to VIPs—putting its balance sheet behind it—as it does not have the benefit of using junket operators as intermediaries. But the company does not believe the second quarter is indicative of its overall profitability in Singapore going forward. “One quarter does not a trend make,” Mr Adelson said on the conference call announcing the results. Observers tend to agree. “Momentum has definitely shifted to Marina Bay in terms of profitability,” says one Singapore-based gaming analyst. “Best look at EBITDA and EBITDA split [between MBS and RWS], it’s probably like 60/40, whereas a year and a half ago it was 40/60, so it has really shifted.” One of the principal reasons for this can be put down to the property’s iconic status. While Resorts World Sentosa has managed to bring large numbers of people through its doors, partly thanks to the opening of Universal Studios and the arrival of celebrity chefs like Joel Robuchon, as the profile of MBS has grown both domestically and internationally, it has secured the bulk of the business. “When you’re in the airport looking at the bookshops and you see books on Singapore, I’d say 70% of all books have Marina Bay on Resorts World Sentosa “Momentum has definitely shifted to Marina Bay in terms of profitability. Best look at EBITDA and EBITDA split [between MBS and RWS], it’s probably like 60/40, whereas a year and a half ago it was 40/60, so it has really shifted.”