Las Vegas Sands’ Singapore Gaming Likely To See Steady Growth In The Coming Years
Las Vegas Sands’ (NYSE:LVS) Singapore operations have benefited from the decline seen in Macau gaming in the past few quarters. There are more visitors travelling to Singapore from China, aiding Sands’ casino business. Year to date, revenues and EBITDA have still declined in mid-single digits, primarily due to currency issues and a decline in international visitor arrivals from other countries. In fact, Singapore EBITDA was up over 20% on a constant currency basis in Q3. Las Vegas Sands’ Singapore property is likely to continue this trajectory until the time Macau sees some recovery. Given the crackdown in Macau, VIP gaming to some extent has found its way outside of Macau. Now the Macau-based junket operators are working with casinos outside of Macau. This could lead to a scenario where Beijing may further tighten its scrutiny for money transfers to and from foreign jurisdictions, thereby making them a less attractive option and VIP gaming may eventually return to Macau. [1] Even if that were to happen, Sands’ Singapore operations are likely to do well in the coming years led by economic growth and increased visitor arrivals from nearby countries.
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Las Vegas Sands’ VIP gaming volume has increased sharply from $22 billion in 2010 to $60 billion in 2013. Apart from domestic demand, Singapore caters to gaming demand from neighboring countries such as Malaysia and Thailand, aiding to the gaming industry’s overall growth. However, 2014 turned out to be rough. After a massive decline in Macau, Singapore’s VIP gaming volume also plunged around 30% to $43 billion. Despite lower volumes, Sands’ revenues actually increased due to a better win percentage. Looking at 2015, revenues have so far declined 6% while volume is down 4.5%. [2] We forecast rolling chip volume to grow in a low single digit range in the coming years and be around $50 billion by the end of our forecast period (towards 2022). Looking at mass-market gaming, volume has remained stable at around $4.5 billion over the last four years. Going forward, we expect mid-single digit growth and forecast the turnover to be around over $5.5 billion by 2022.
Economic recovery in Singapore will predominantly drive growth for the casinos. Singapore’s economy grew around 2% so far in 2015 and it is expected to grow around 3% in 2016. [3] Growth will likely gain momentum with growth in the U.S. economy as external demand will strengthen and boost exports. Moreover, the rise in international tourists visiting Singapore will aid overall growth. Visitor arrivals have seen steady growth in the past while 2015 remains challenging, and so far this year the figure has declined -0.3% amid currency issues. [4] Visitor arrival from China surged over 20% during the same period, primarily reflecting the gaming scene in Macau, which has led many players to look for options outside of Macau. We expect the visitors’ growth from other countries to resume in the coming years as the nearby economies grow at a higher pace. In fact, growth in other Asian economies such as Malaysia and India will also aid casino volumes in Singapore. The reason for our moderate growth outlook on gaming in Singapore is the tight regulatory framework. The Singaporean government has introduced strict measures to minimize social costs from the casinos’ success, and imposed an entry fee of 100 Singapore Dollars a day for Singapore’s citizens and permanent residents to enter the casinos. These factors will have an adverse effect primarily on the mass-market table games turnover for both casino operators in Singapore.
- Regional casino risk from China crackdown: S. Bernstein, GGR Asia, Nov 25, 2015 [↩]
- Las Vegas Sands’ SEC Filings [↩]
- S&P latest to cut outlook for S’pore, Straits Times, Sep 11, 2015 [↩]
- International Visitor Arrivals Statistics, Singapore Tourism Board, As of Nov 2015 [↩]