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It still wasn’t a good quarter, but not far off from our numbers – in-line on a hold adjusted basis.

There wasn’t a whole lot of love for the numbers that Genting reported this past Friday morning.   One of the issues is that the market had unrealistic growth expectations for Singapore (see our "Singapore 1Q Review," 5/16/2011) and the 2nd sequential decrease in RC volume was disappointing and likely unexpected.  Analysts also likely failed to fully adjust for the high hold that Genting experienced last quarter – which not only boosted their numbers but overall market growth.  With the difficult comparison, this quarter was set up to disappoint. 

We generally think that the Singapore gaming market will experience moderate growth until junkets are licensed which will provide some lift to the VIP RC volumes.  Much of the growth opportunity is in ramping up non-gaming revenues and normalizing margins on non-gaming amenities.  As long as people keep expecting Macau-like growth, we expect that results may continue to disappoint, although at 9.5x 2012 EBITDA, Genting Singapore isn’t exactly expensive.

So what happened in 2Q11?

  • Singapore Integrated Resorts Gross Gaming Revs (GGR) declined 5.6% QoQ
  • Average hold since 1Q10 has been 2.96% - this quarter hold was only 2.82% which dampened growth.  If we use the average hold rate for the last 3 quarters, sequential growth from 1Q to 2Q was 2% and 3% from 4Q10 to 1Q11.
  • Genting lost share QoQ due to difficult hold comparisons and a big drop in RC share
    • Since MBS opened, Genting’s average share of RC has been 58%; it dropped to 52% this quarter.
      • This is probably the most disconcerting takeaway from the quarter, although we should have expected share to migrate toward 50% over time.

2Q Details (in Singapore $s unless otherwise noted):

  • Net gaming revenue of $584MM and estimated GGR of $854MM
    • The difference between gross and net gaming revenues consists of VIP rebates, gaming points (loyalty points) for Mass, and GST
    • VIP RC: $16.4BN and hold of 2.66% for a gross win of $437MM
      • Rebate rate of 1.24% or $204MM and $15MM of GST taxes
  • We estimate that Mass drop was $1.4BN, roughly flat QoQ and slightly above MBS’s number according to the management
    • 19.5% win rate and Mass gross win of $273MM and net Mass win of $222MM
    • GST of $18MM
    • Gaming points of $33MM or 2.4% of drop
  • Slot & EGT handle of $3BN and win rate of 4.8%
    • Management mentioned that RWS’s hold is just below 5% and that their handle was a little better than MBS’s
    • Win rate on slots is over 7% while the win rate on EGT’s is between 2.2-2.5%
    • Non-gaming revenue of $132MM
      • Room revenue of $33MM
      • USS revenue of $78MM
      • F&B and other revenue of $21MM
      • We estimate that fixed expenses were flat QoQ

Outlook:

  • Assuming normal hold, we expect 3Q11 EBITDA of S$407MM and net revenue of S$774MM
  • For FY11, we expect EBITDA of S$1.78BN and Net revenue of S$3.3BN, 9% below and 1% above the Street, respectively.