Why Marina Bay Sands is all eyes on Japan gaming market

US$10b GGR could beat Singapore.

According to DBS, 4Q13 hold-adjusted EBITDA fell 8% y-o-y (flat q-o-q) to US$372m/S$476m dragged by lower rolling chip (-17% y-o-y, flat q-o-q) and non-gaming revenue (-7% y-o-y, +6% q-o-q due to seasonality).

VIP win rate resumed its underperformance (1.9% vs theoretical average of 2.7-3.0%) after recovering for just a quarter in 3Q13.

Here's more from DBS:

The saving grace was stronger mass volume (tables: +2% y-o-y; -2% q-o-q; slots: +5% y-o-y, +2% q-o-q). LVS will focus on growing its foreign premium mass segment and improving margins as VIP GGR is expected to remain flattish given slower economic growth in China.

The legislation to liberalise Japan’s gaming has been submitted to the Diet in Dec and is expected to be passed by June. It remains to be seen how profitable Japan IRs will be depending on location (likely Tokyo & Osaka), gaming taxes, restrictions on locals gambling (likely to emulate Singapore’s entry levy) & junkets, local partnership requirements and capex (>US$6bn with construction cost rising en-route to 2020 Olympics).

We estimate Japan’s GGR could hit US$10bn to surpass Singapore and Las Vegas as the second largest gaming market in the world after Macau.

While bidding competition will be stiff (2016 at the earliest with completion by 2020), GENS and Las Vegas are front-runners due to their strong IR track record.

Korea and Vietnam are also under LVS’ radar (but potential limited for now due to restrictions on locals gambling).

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