Gaming – Singapore - UOB Kay Hian 2020-07-23: Marina Bay Sands 2Q20 ~ A Washed-out Quarter


Gaming – Singapore - Marina Bay Sands 2Q20 ~ A Washed-out Quarter

  • Las Vegas Sands’ (LVS) 2Q20 results revealed lockdown-ravaged results for Marina Bay Sands (MBS). MBS 2Q20’s drastic > 95% y-o-y revenue plunge coupled with EBITDA loss of S$159m reflect the impact of a prolonged circuit breaker where MBS operated for only one week.
  • Overall, we expect 65-70% contraction in GGR for Singapore’s casinos in 2020. Maintain MARKET WEIGHT on the sector.
  • Expect interim weakness for Genting Singapore (SGX:G13) to reflect delayed prospects of border reopening amid the stubborn regional presence of new COVID-19 infection cases.

Marina Bay Sands (MBS): Hit by overall weaker gaming statistics.

  • Las Vegas Sands’ (LVS) 2Q20 results revealed that Marina Bay Sands’ (MBS) adjusted EBITDA swung into a US$113m loss (2Q19: US$346m profit), as VIP and mass market volumes plunged. Hold-normalised adjusted EBITDA swung into a US$112m loss.
  • On a constant currency basis (in Singapore dollars). 2Q20’s mass market (table and slot) gross gaming revenue (GGR) shrank 98.6% y-o-y, while VIP GGR declined 97.8% y-o-y. Mass:VIP GGR mix for tables (ie excluding slots) stood at 70.4%:29.6% in 2Q20 (1Q20: 48%:52%, 2Q19: 60%:40%).
  • We also see a fall in MBS’ EBITDA margin in 2Q20 at -491.3% (1Q20: +46.1%, 2Q19: +50.3%).
    1. VIP: RCV declined sharply y-o-y. On a constant currency basis, we estimate MBS' 2Q20 RCV plunged 98.3% y-o-y and 98.2% q-o-q, mainly due to the temporary closure of premises to comply with Singapore’s lockdown. The weaker RCV coupled with a lower win rate of 1.91% in 2Q20 (1Q20: 3.53%) resulted in GGR plummeting 23.4% q-o-q. Meanwhile, RCV fell 98.9% y-o-y. Coupled with a lower y-o-y win rate of 1.91% (2Q19: 2.49%), VIP GGR fell 98.9% y-o-y in 2Q20.
    2. Mass market: Depressing volumes. In Singapore dollars, we estimate mass market non-rolling volume plunged 97.6% q-o-q (eclipsing the historical q-o-q drop of 3-7%). 2Q20 non-rolling volume fell 97.8% y-o-y, while slot handle plunged 97.4% y-o-y. With a much lower volume despite a slightly higher win rate of 22.2% (1Q20: 19.8%, 2Q19: 22.0%), mass table GGR plunged 97.8% y-o-y while slot GGR plunged 97.7% y-o-y in 2Q20. Hence, overall mass market GGR fell 97.8% y-o-y on weaker mass table GGR and slot GGR.

Resorts World Sentosa (RWS): Expecting a washed-out quarter.

  • With Resorts World Sentosa (RWS) operating for only one week in 2Q20, expect gaming and non-gaming revenues to plunge and RWS to also incur EBITDA loss, although there’s some buffer from cost rationalisation efforts (wage cuts and retrenchments) coupled with the government’s incentives (Job Support Schemes and property tax rebate).
  • Our Genting Singapore forecasts have already imputed y-o-y net profit decline of 92% for FY20 and 18% for FY21.

Maintain MARKET WEIGHT; slower recovery in 2H20.

  • Although casinos have resume operations in Jul 20, 2H20 remains challenging, given the Singapore gaming industry’s high reliance on foreign travellers. Furthermore, stringent social distancing set-ups and limitations of gaming capacity at 25% will also continue to stifle gaming volumes and blemish near-term earnings.

Dashed hopes for a quicker border reopening.

  • With the emergence and rise of Covid-19 cases in the region, it is unlikely that there would be relaxation of borders in near term, which is negative to the sector which is highly dependent on airlift foreign tourists.

Fate of Genting Singapore’s near-term share price rests on decision on Japan IR bid.

  • We expect Genting Singapore's share price to weaken in tandem with its regional peers, reflecting slow regional prospects of border reopening. We can only foresee upside to Genting Singapore's share price if the company pursues a more aggressive capital management, which in turn depends on where Genting Singapore continue to pursue its bid for the Japan IR which requires hefty capex and bears an uncertain payback.

Maintain HOLD for Genting Singapore.

Vincent Khoo CFA UOB Kay Hian Research | Jack Goh Tooan Orng UOB Kay Hian | https://research.uobkayhian.com/ 2020-07-23
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.800 SAME 0.800