Union Gaming Research publishes company research and analysis on the global gaming industry. Our research analysts continually identify and analyze financial information and trends that affect the industry.
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March 22 2012
CRA approves two junkets for RWS - This evening, Singapore’s Casino Regulatory Authority announced that it had approved two junkets to operate at Genting Singapore’s (GENS SP) Resorts World Sentosa, representing the first such time junkets (to be known as International Marketing Agents) will be able to operate in the jurisdiction. At this point, the CRA has not yet approved any junkets who wish to operate at Las Vegas Sands’ (LVS) Marina Bay Sands. The junkets will receive one-year licenses. We note that the CRA’s language is quite forceful, suggesting licensees will be continually subjected to suitability tests upon pain of revocation. A condition of the approval is that junkets only target foreigners – suggesting that locals are off limits.
Junket commissions likely to be higher than in Macau - We believe that RWS has been paying direct player rebates of around 1.25% of rolling chip volume, which is inline with rolling chip-based junket commissions in Macau. With junkets in the mix in Singapore, we believe the commission rates paid on this incremental play could likely be an additional 20bps (junket commissions are always higher than direct player rebates). We estimate that a 20bps increase in rolling chip commission results in about a 1,000bps decline in associated EBITDA margin. As such, we would expect the impact of junkets to have a positive effect on EBITDA dollars and a negative effect on EBITDA margin.
February 01 2012
Las Vegas Sands reported impressive 4Q11 results, particularly at the company’s Macau and Singapore properties. In Las Vegas, 4Q11 earnings came in below consensus, however, we believe that this quarter’s performance is a direct result from a conscious shift in customer mix, driven by a cut back in promotions, particularly, room comps (explained in greater detail herein). Overall, the company is firing on all cylinders. We would be buyers of LVS shares on continued growth in Singapore and Macau (with few signs of a slowdown and our forecast for 20% market growth) and LVS’ ability to generate significant free cash flow, which could be used to fund an annual dividend or finance future growth opportunities.
LVS 4Q11 recap - In 4Q11, LVS reported total net revenues of $2.54bn (+26.3% versus $2.02bn y/y), EBITDAR (post corporate expense) of $898.8mm and adj. EPS of $0.57. This compares to the Street estimate for revenues of $2.47bn, EBITDAR (post corporate expense) of $884.0mm and adj. EPS of $0.57. Total company EBITDAR margins increased 110bps to 37.8% (versus Street estimate of 35.8%). 4Q11 results were driven by solid quarters in Macau (EBITDA +27.2%) and Singapore (+39.6%), albeit a bit mitigated by a weaker quarter in Las Vegas (+0.4%). It is important to note that LVS’ 4Q11 results were favorably impacted by higher hold in Singapore, which had an estimated $25mm incremental benefit to EBITDA. Using a normalized hold, we estimate MBS’ EBITDA in 4Q11 of $402mm. Lastly, LVS board members declared an annual dividend of $1.00 (payable quarterly). We believe the dividend will be recurring and could be upsized in the future based on LVS’ liquidity needs.
July 27 2011
Las Vegas Sands reported very impressive all-around results in 2Q11. Solid quarter in Las Vegas was overshadowed by record numbers at Sands’ Macau and Singapore properties. In 2Q11, LVS reported total net revenues of $2.35bn (+47.1% versus $1.59bn y/y), EBITDAR (post corporate expense) of $852.4mm and adj. EPS of $0.54 (see Figure 1 in the attached PDF). This compares to Street estimate for revenues of $2.21bn, EBITDAR (post corporate expense) of $761.9mm and adj. EPS of $0.44. Total company EBITDAR margins increased 880 bps to 38.4% (versus Street estimate of 35.7%). The strong EBITDAR margin improvement can be attributed to the higher margin EBITDAR contribution from Singapore (+55.0% margin) as well as strong margin improvements at LVS’ Macau properties (+310bps combined), Las Vegas (+400bps)and Sands Bethlehem (+400bps), which benefitted from the addition of table games. We would be buyers of LVS shares on expected continued strength in Singapore and Macau in the coming quarters as well as improving Las Vegas results.
May 04 2011
LVS 1Q11 recap - In our opinion, Las Vegas Sands strong top-line results were overshadowed by low hold in Singapore and Las Vegas properties. In 1Q11, LVS reported total net revenues of $2.11bn (+58.2% versus $1.33bn y/y), EBITDAR (post corporate expense) of $699.9bn and adj. EPS of $0.37. This compares to our estimate of revenues of $2.21bn (vs. $2.14bn Street), EBITDAR (post corporate expense) of $727.4bn (vs. $743.9mm Street) and adj. EPS of $0.44 (vs. $0.44 Street). We estimate low hold in Singapore and Las Vegas impacted 1Q11 EBITDAR by $36mm during the quarter, thus using a normalized hold, EBITDAR (post corporate) would have been approximately $735.8mm. Total company EBITDAR margins increased 750 bps to 35.3% (versus our estimate of 27.8%). The strong EBITDAR margin improvement can be attributed to the higher margin EBITDAR contribution from Singapore (+48.6% margin) as well as strong margin improvements at LVS’ Macau properties (+570bps combined) and Sands Bethlehem (+800bps), which benefitted from the addition of table games. We would buy the LVS shares on material weakness this morning (-10% in after-market trading), which in our view experienced an unwarranted sell off due to low hold (bad luck) in Las Vegas and Singapore, and an additional delay for completion of sites 5/6 in Macau.
May 02 2011
LVS 1Q11 Preview
UGR LVS estimates - We are forecasting total net revenues and property EBITDAR of $2.21bn and $765mm for 1Q11 and EBITDAR (post corporate expense) of $727mm. This compares to consensus net revenues and EBITDAR (post corporate expense) of $2.14bn and $744mm.
Singapore – We anticipate strong volumes offset by lower hold. Based on a run-rate US$6bn gaming market (soon) our 1Q11 revenue and EBITDAR estimates are $633mm and $313mm, respectively. In January 2011, MBS’ EBITDAR exceeded $110mm (excluding Chinese New Year), projecting the current run-rate EBITDAR at over $1.2bn+. While there is a smaller magnitude of VIP players in Singapore relative to scores of junket-manufactured VIPs in Macau, Singapore’s VIPs are materially larger theoreticals. We think MBS has raised table limits to capture this play which could result in stronger volumes. We are projecting sequentially higher VIP volumes but less than half of those at RWS Singapore, a function of current VIP strategy. In addition, we are projecting that MBS under held in the quarter. Our model calls for 49.5% margins in the period, however, on a daily basis, margins are often in the 50%+ range at MBS, a function of a deep market with extremely low gaming taxes and a smart regulatory / governmental system that only issued two licenses. We understand that MBS is capacity constrained in certain week-parts in its electronic games business (slots & e-tables) which given a higher tax rate than VIP works into our margin assumptions.
Macau – Market-wide gaming revenues up 43% in 1Q11. Macau’s 1Q11 market-wide gaming revenues came in at MOP 58.5bn (US$7.3bn) representing an increase of 43% y/y. Based on the MOP19.5bn average monthly GGR during 1Q11, the run-rate would suggest MOP234bn for the full year 2011 (US$29.2bn) or a 24% y/y increase. Based on a confluence of factors we believe GGR growth for the year is likely to exceed this rate and will be towards the higher end of a range of +25% to +30% given that trends in the second half of the year are usually stronger than the first. This would result in GGR of MOP235bn to 245bn (US$29.4bn to $30.6bn) for the year. To put this in perspective, GGR of US$30.6bn in Macau is likely to be more than 5x the amount of GGR on the Las Vegas Strip this year (vs. 4x last year). We believe upside to gaming revenues in Macau are catalyzed by substantial working capital support for junkets by concessionaires, incrementally liberal direct credit play, appreciation in the Chinese Renminbi (RMB) versus the Hong Kong dollar (HKD) and to a degree, strong visitation from mainland China bolstering mass market volumes. In 1Q11 it appears that LVS maintained approximately 17.3% of Macau’s market share. Our 1Q11 Macau EBITDA estimate is $358.4mm (+38.3% vs. 1Q10).
March 30 2011
Singapore visitation up 15.4% to a new February record
Visitation recap - Visitation to Singapore increased 15.4% in February, to 990K persons. This represents a new February record (vs. 857K in February 2010). The comp was difficult at +24% and will average +20% for the remainder of the year. Recall that Genting Singapore’s (GENS SP) Resorts World Sentosa opened in late January last year, followed by Las Vegas Sands’ (LVS) Marina Bay Sands in late April.
Mass market strength evident - The strength of the mass market is evident in these record February numbers. Based on recently reported 4Q results, we estimate RWS mass market business accounted for 40% of property GGR, while at MBS, mass market accounted for about 55% (the absolute $ amount of mass market GGR increased sequentially at both).
A comment on VIP - We believe RWS is generating rolling chip volume of US$20-$25bn per quarter, while MBS is producing ~US$10bn per quarter, a function of current VIP strategy.
Visitation sources - All of the top fifteen inbound markets experienced growth, with the top two sources of visitation experiencing above-market-average growth: Indonesia (+23% y/y; representing approximately 18% of total visitation) and China (+5%; representing 15% of total visitation). The highest overall growth rate continues to come from Hong Kong, which experienced growth of 53%.
Hotel metrics wrap-up - Market-wide hotel occupancy was up 310 bps y/y in February to 83%, while average daily rate (ADR) increased 18.3% y/y, to S$220 (US$174). This resulted in RevPAR up 14.2%, to S$183 (US$145). Recall that Singapore typically has higher midweek rather than weekend hotel occupancy given its historical focus on business travel.
February 04 2011
Las Vegas Sands reported a spectacular quarter across Singapore and Macau, while Vegas was even encouraging. The company truly over-delivered at Marina Bay Sands while dizzying expectations into the print are driving the LVS shares lower this AM. There is some focus on lower sequential rolling chip volume which we believe is a function of seasonality along with a smaller number of (yet higher value) VIPs. This is structurally different than Macau’s junket manufactured VIP base. Suggesting this is a negative exercise in intellectual dishonesty in our view, which misses the bigger picture, especially sans junkets. We would buy the LVS shares on material weakness this AM (-7%) which on an embedded basis appear to be notably undervaluing Singapore or Las Vegas (or both). The free cash flow story at LVS continues to improve with magnitude that should enable the company to de-lever with greater expediency than most models anticipate. As a read-through from the LVS quarter we’d also be buyers of MGM on Las Vegas improvement as well as Genting Singapore (GENS) into its late February results.
February 01 2011
We are forecasting total net revenues and EBITDAR (post corporate expense) of $2.27bn and $718mm for 4Q10 and property EBITDAR of $752mm (versus consensus of $700mm). This compares to consensus net revenues and EBITDAR (post corporate expense) of $2.06bn and $679mm. Our estimates presumably capture higher rolling chip volume in Singapore (albeit at a slightly lower than theoretical hold %) and greater gaming revenue growth in Macau relative to consensus.
December 22 2010
Visitation to Singapore increased 15.8% in October and is now up 21% on a YTD basis following the opening of Genting Singapore’s (GENS SP) Resorts World Sentosa in late January and Las Vegas Sands’ (LVS) Marina Bay Sands in late April. This compares to full-year visitation declines of 2% in 2008 and 4% in 2009. The comps were relatively easy this month (-1%), but will become tough going forward. The absolute number of visitors in October was 978,000, which was the second highest number of record relative to 1,095,000 in July.
November 11 2010
Resorts World Sentosa's (RWS) 3Q results, while sequentially lower, appeared directionally inline with management's recent messaging on the quarter. Most importantly, we come away from these (and Marina Bay Sands) solid results equally as enthusiastic about the prospects for the Singapore gaming market. Singapore is a market literally in its infancy and is structurally among the best markets in the world (low taxes, limited licenses, deep-underpenetrated region). We strongly believe we will frequently be surprised to the upside on market size and cash flow generation at the two IR's, not the least of which will be due to the near-term introduction of junkets. From our perspective all signs point to annual EBITDA of S$2B for Resorts World Sentosa (RWS) on a run-rate basis as early as 2011.
October 29 2010
Visitation to Singapore increased 18% in September and is now up 22% on a YTD basis following the opening of Genting Singapore’s (GENS SP) Resorts World Sentosa in late January and Las Vegas Sands’ (LVS) Marina Bay Sands in late April. This compares to full-year visitation declines of 2% in 2008 and 4% in 2009. The comps began to get difficult this month at 8% and with the exception of October (-1%) will remain tough going forward. The absolute number of visitors in September was 947,000, which was the third highest number of record relative to 1,095,000 in July. In addition to visitation driven by the new Integrated Resorts, September visitation was boosted by the Singapore F1 Grand Prix.
October 28 2010
In its first full quarter of operations, Marina Bay Sands (MBS) reported net revenues of $485.9mm and EBITDAR of $241.6mm (a 49.7% margin), despite still limited non-gaming amenities available and lower-than-expected hold on rolling chip play of 2.65%. We believe average hold in the region (Genting Highlands) has been 2.70% to 2.75% since 1965, or about 5bps to 10 bps higher than 3Q10 hold at MBS. Accounting for a more normalized hold of 2.70% we believe MBS adjusted property EBITDAR would have been closer to $250mm .
Results in Macau continue to be very strong, although not surprisingly so given reported monthly revenues consistently in excess of MOP 15bn. During the quarter, all of LVS’ Macau assets held higher than our expectations for VIP play and beat our net revenue and EBITDAR forecasts for 3Q10 by 12.9% and 26.3%, respectively. Our new estimates for 4Q10 and beyond are detailed in a following section and contemplate more normalized hold, although similar gaming volumes on a sequential basis.
September 28 2010
Visitation to Singapore increased 18% in August and is now up 22% on a YTD basis following the opening of Genting Singapore’s (GENS SP) Resorts World Sentosa in late January and Las Vegas Sands’ (LVS) Marina Bay Sands in late April. This compares to full-year visitation declines of 2% in 2008 and 4% in 2009. The comps begin to get more difficult going forward (was -1% this month and then will be flat to high-single-digits through December). The absolute number of visitors in August was 996,000, which was the second highest number of record relative to 1,095,000 in July.
August 27 2010
Visitation to Singapore increased 24.1% in July and is now up 22.9% on a YTD basis following the opening of Genting Singapore’s (GENS SP) Resorts World Sentosa in late January and Las Vegas Sands’ (LVS) Marina Bay Sands in late April. This compares to full-year visitation declines of 2% in 2008 and 4% in 2009. Twelve of the top fifteen inbound markets experienced growth, with notable sources of gaming volume: China 63%, Malaysia 53%, Hong Kong 40% and Indonesia 37%. Market-wide hotel occupancy was up 1,020 bps y/y in June to 90%, while average daily rate (ADR) increased 19.9% y/y, to S$209. This resulted in RevPAR up 35%, to S$188. We note that LVS intends to price its room product at the high-end of the market. Recall that Singapore typically has higher midweek rather than weekend hotel occupancy given its historical focus on business travel. In its stub 2Q (without the full complement of hotel rooms and other non-gaming amenities), Marina Bay Sands occupancy and ADR were 54.9% and US$226 (S$306).
August 12 2010
The relevant operating segment of GENS is Resorts World Sentosa (RWS), which opened on January 30, 2010. Net revenues and EBITDA were S$860.8mm and S$503.5mm, respectively (USD 632.1mm and 369.7mm, respectively). EBITDA margin was a stellar 58.5%, up from 32.5% in the 1Q10 stub quarter. Normalized for hold (RWS held lucky in 2Q although the company would not quantify the impact), EBITDA margin should have been approximately 53%. The majority of revenue and EBITDA was generated from the casino portion of RWS.
Considering Genting Malaysia’s (GENM MK) willingness to deliver an upfront fee of US$380mm to the State of New York for the Aqueduct license, these shockingly favorable results perhaps should not be overly surprising. Another read-through could be that GENM’s business at Genting Highlands in Kuala Lumpur, Malaysia, is not being cannibalized as much by RWS / MBS relative to consensus expectations.
July 28 2010
We are forecasting total revenues and EBITDAR of $1.7bn and $490mm (from $435mm) for 3Q10. For the full year 2010, we are forecasting $6.4bn in revenue and $1.78bn in EBITDAR (from $1.62bn). For the full year 2011, we are forecasting $7.4bn in revenue and $2.2bn in EBITDAR (from $2.1bn). Most of the increase to our forecast can be attributed to our new estimates for Marina Bay Sands, including taking our 2011 EBITDAR estimate to $879.7mm, from $796.3mm.
Shares of LVS are currently trading at 14.7x our 2010 EBITDAR estimate and 11.6x our 2011 est. This compares to its large cap US and Asian peers at 14.2x 2010 EBITDA and 10.5x 2011 EBITDAR (including Genting Singapore at 21.7x and 15.3x 2010 and 2011, respectively). We think 2011 is the more appropriate valuation comp given that it includes a full-year of cash flow from MBS Singapore.
July 27 2010
Visitation to Singapore increased 26.7% in June and is now up 22.6% on a YTD basis following the opening of Genting Singapore’s (GENS SP) Resorts World Sentosa in late January and Las Vegas Sands’ (LVS) Marina Bay Sands in late April. This compares to visitation declines of 2% in 2008 and 4% in 2009. Fourteen of the top fifteen inbound markets experienced growth, with notable sources of gaming volume: China 66%, Malaysia 51%, Hong Kong 48% and Indonesia 34%. Market-wide hotel occupancy was up 1,230 bps y/y in June to 88%, while average daily rate (ADR) increased 22.7% y/y, to S$219. This resulted in RevPAR up 42.6%, to S$192. We note that LVS intends to price its room product at the high-end of the market. Recall that Singapore typically has higher midweek rather than weekend hotel occupancy given its historical focus on business travel.
July 16 2010
Much like our commentary earlier this week on WYNN, we believe LVS is seeing weekend strength at Venetian and Palazzo, particularly with respect to the ability to raise room rates without sacrificing occupancy. High-end table volume appears to be relatively stable as well despite new supply notwithstanding seasonal sequential softening in May/June. However, mid-week business is still tough with weaker room rates and a less-than-ideal customer base (gamers with lower theoretical). We think group business is picking up and LVS will finish 2010 with more group room nights sold on a y/y basis, although at a lower ADR and likely lower RevPAR.
During 2Q10, Macau gaming revenue increased about 76% ( 66% YTD), although we would remind investors that comps begin to get quite difficult beginning in September ( 55%), while the average comp in 4Q10 is 50%. Ultimately, we believe the strength in level of gaming revenues (not y/y growth) will extend through the remained of 2010. This is a non-consensus view as we anticipate non-sustainable junket funding / working capital velocity and a hands-off stance from the central government to continue through the one-year anniversary of the new administration in Macau.
December 07 2009
Genting Singapore (GENS SP) will likely open its S$6.6bn Resorts World Sentosa (RWS) in Singapore throughout January and February 2010. RWS will open with four of its ultimate six hotels (approx. 1,300 of 1,800 total rooms), Maxims Tower (high end), Hotel Michael, Hard Rock Hotel (including 7,300 delegate ballroom) and Festive Hotel (family oriented), Resorts World Casino, Universal Studios Singapore, FestiveWalk, and Le Vie Theatre (which will double as a conference hall).
We often hear analyst commentary suggesting that RWS will be challenged / disadvantaged, or even fail due to the family element of the resort (Universal Studios / Festive Hotel / FestiveWalk) mixing with the casino component, unlike Las Vegas Sands' Marina Bay Sands (MBS) - the other Integrated Resort (IR) forthcoming in Singapore, given its non-family orientation. We strongly disagree with this somewhat consensus view and believe RWS can be successful--bolstered, not hampered by the family dynamic.