Genting Singapore 2013 profit to plunge by 50%

Blame it on heightened regulatory risks over casino gambling which likely to persist till 2015 election.

Government's month-long public consultation process in July to amend Casino Control Act is just the beginning and more to come, says Nomura.

Here's more from Nomura:

On July 6, the government surprised investors by announcing that it would start a month-long public consultation process seeking the public’s feedback before making amendments to the six-year old Casino Control Act.

The latest regulatory move reaffirmed our core assumption that unlike Macau, the Singapore government has no plans to make Singapore a gambling hub, in our view. We see heightened regulatory risks persisting into the next general election in 2015 as the government is mindful of the ill-effects of casino gambling on the public (voters). The proposed amendments would take into account the timing of the next general election taking place just months before the next casino licence renewal in 2016. Over the longer-term, a complete overhaul of the low gaming tax structure could not be discounted.

Sensitivity analysis; mass market business could fall by half Frequent visitors account for a significant amount of gaming revenue and the proposed amendments to limit the number of visits by frequent
visitors (in addition to the current family and voluntary self-exclusion) to the casinos could result in sharp declines in mass market gambling revenue. Our sensitivity analysis suggests that a 50% decline in the
mass market business (non-rolling chip and slots) could slash 2013’s earnings by 53% and our PT by 40% to S$0.85/share.

In our previous report, we highlighted that one of the key regulatory risks was the potential abolishment of the S$2000 annual pass to discourage frequent visitors. With a S$2,000 annual pass, gamblers could get addicted and try their luck as often as five times a week given their close proximity to the two casinos.

Too much unknown in the upcoming 2Q earnings Investors are looking past the usually top-line numbers in the upcoming 2Q12 earnings, scheduled to be released after market hours on August 10, in our view. What also matters is the sizable amount of bad debts to be written off on top of the weaker VIP and mass market segments. We will be reassessing our earnings estimates and target price post the 2Q
earnings reporting.

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