Marina Bay Sands’ loss is Genting’s gain: DBS Vickers

Source : Business Times – 23 Dec 2009

RWS gets first mover advantage from rival’s delay

GENTING Singapore’s Resorts World at Sentosa (RWS) will benefit from construction delays at Marina Bay Sands (MBS) caused by problems with weather and sub-contractors.

In a research note yesterday, DBS Vickers said: ‘The second delay in the soft launch of MBS will further enhance RWS’s first mover advantage.’

DBS Vickers also said that ‘RWS should be able to catch the Chinese New Year peak season and lock in local market share’, highlighting that the $2,000 annual pass in lieu of $100 per entry to be paid by Singapore residents is exclusive to one casino.

The broking house maintains a ‘buy’ call on Genting Singapore at $1.16 a share and a target price of $1.30 per share.

‘RWS is on track to open in January 2010 and has submitted its casino licence application – now pending finalisation of the Casino Control Act and interviews of employees by the authorities,’ it said, adding that RWS has already recruited about 6,000 staff out of a target of 8,000.

The research note comes a day after Las Vegas Sands chairman Sheldon Adelson said the opening date for MBS had been pushed back from the first quarter of 2010 to Q2.

Speaking at a news conference, he attributed the delays to rain and certain sub-contractors going bankrupt.

Mr Adelson also shed light on the prospect of junket operators, saying that few, perhaps even none, will operate here.

In its research note, DBS Vickers said a strict junket licensing regime will be in place ‘and we believe the Singapore government will be pragmatic in ensuring both integrated resorts will be a success’.

For RWS, DBS Vickers expects gaming revenue to come mainly from the grind segment, contributing about 60 per cent of gaming revenue.

‘Universal Studios should help draw in the mass market, differentiating RWS from MBS’s MICE/business visitors focus and help diversify revenue base,’ it said. It expects non-gaming revenue to contribute 25-30 per cent of RWS’s total revenue.

‘In any case, a higher percentage of direct VIP business should help boost margins given the typical lower rebates compared with junket commissions,’ it said. ‘Although this could lead to higher default risk, we believe it should be easier to conduct credit checks and enforce debts given Singapore’s target market.’