Eyes on the prize: Singapore's gaming operators brace for Japan bid in 2019

Genting Singapore (GENS) is already beefing up its headcount  in preparation for its Japan expansion.

The thrill of new things in Singapore’s gaming sector has died down as analysts expect only flat or low single-digit growth after the 10-year exclusivity provision for gaming licenses ended in 2017. However, incumbent gaming companies are trying to get the ball rolling in Japan.

Japan has yet to implement its Integrated Resort (IR) Implementation Bill and the process to get it through the finish line might take a while, but Genting Singapore (GENS) and Las Vegas Sands (LVS), acting for Marina Bay Sands (MBS), are already courting Osaka’s government for an eventual bidding by 2019.

It was reported in August that GENS is already adding to its headcount in preparation for its Japan expansion. Meanwhile, Reuters reported that LVS has focused on engaging with local officials, businesses, and community groups in Osaka. Chief executive Sheldon Adelson even met with governor Ichiro Matsui in September.

So, should the market expect anything exciting for Singapore gaming firms overseas? Not yet, as the bidding of licenses will only commence at earliest in 2019 with license awards only in 2020, Wei Kiat Ng, analyst at S&P Global Ratings told Singapore Business Review. What the market could see instead is the push-pull of market share between GENS and MBS.

Also read: No luck with Singapore's gaming sector until 2019

In particular, MBS has gained market share over GENS over the past few years thanks to its “more convenient” CBD location and its landmark status, Wei said. GENS’ market share of total wins from Resorts World Singapore (RWS) has plummeted from 50% in 2014 to just 35-40% this year.

This does not mean MBS is in any good shape as well. For its results published in July, the company reported its lowest rolling chip volume (RCV) in eight years. It reported lower win rates for its VIP market, pulling down revenue in the segment by 58% YoY.

Wei noted that GENS, having a large exposure to the VIP market, is vulnerable to a decline in VIP rolling volumes and win rates. “Hence, we note that GENS is slowly shifting its focus to lure more mass-market players, which will help to partially the volatility of earnings,” he added.

To spice things up, GENS has been focusing on restaurant events, and other attractions to try to increase premium mass visitation, which will help to sustain its market position. “Our signature attractions performed well during the second quarter of 2018 with average visitation exceeding 18,000 daily,” GENS said in its results for the first half of 2018. Hotels saw an average occupancy rate of over 91% in Q2.

GENS could see modest growth in gaming revenue of about 3%-4% over a 24-month period, Wei said. “The VIP rolling volumes continue to trend upwards and steady, along with a steady flow of visitors.”

Meanwhile, its EBITDA margin is expected remain healthy in the 38%-40% range over the next 24 months on the back of tighter credit policy and other cost-efficiency measures.

On the other hand, the market is stuck in the doldrums as Wei said it should not expect a new gaming entrant soon. “Despite the recovery in the gaming market, in our view, returns on investment for a new casino in Singapore would not likely be compelling given land availability and competition. In the unlikely case of a grant of a third license, we estimate it would take at least three-to-four years before a new casino could be fully completed and opened,” he added.

In the meantime, the analyst has a stable outlook for the sector, aided by a steady flow of visitations of both tourists and Meetings, Incentives, Conferences, Exhibitions (MICE) events in Singapore.