Why Singapore's casino is not poised to repeat "Macau-Style" growth

Mass market is unlikely to be an area of significant growth but there's no way it is going to decline or show zero growth, says Macquarie.

Here's a key note from Macquarie Equities Research:

We have consistently held the view that consensus expectations of growth for Singapore’s gaming
market were aggressive. Our view was that the Singaporean gaming market opened as a mature
market in the mass-market segment, but that growth in the VIP segment would be dictated by the
operators’ appetite for credit extension (given the lack of junket availability).

We believe that mass market is less of an issue for gaming operators in Singapore. While it is
unlikely to be an area of significant growth, we do not think it is going to decline or show zero growth.

The reason for this is that the majority of the visitation into Singaporean casinos is by foreigners.
Both casinos are attractive products, and we think that concessionaires will continue to do well.
However, we don’t foresee “Macau-style” growth, because we believe that the mass-market visitation
into Singapore’s casinos is constrained by the lack of a hinterland; hotel room infrastructure in
Singapore is a key constraining factor (due to lower day-tripper visitation).

We think mass market is unlikely to grow rapidly, but as long as Singapore maintains itself as an
attractive tourist destination, we think that mass-market gaming revenues will continue to do well.

On the VIP side, the key difference between Macau and Singapore is the lack of junket presence in
Singapore. This means that in Singapore, VIP growth is more dependent on the balance sheet and
credit extension ability of the concessionaires.

Concessionaires are inherently more conservative than junkets and hence have been cautious on
credit extension over 1H12. Add to this the fact that GENS has worked to lower the risk of its debt
book means that it can still continue to re-extend credit and generate revenues. Any easing in the
macro environment would allow GENS to become more aggressive on credit extension again and
start driving VIP growth.

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