GENTING Q1 - IT COULD'VE BEEN SO MUCH BETTER

Gross revenue blowout comes at a high cost

 

 

Sky high rebates, low non-gaming revenues, and higher fixed costs took away from what was a great top line quarter.  It's clear that the flow through on GGR to net revenues at RWS is simply inferior to MBS.  This quarter, net gaming revenue was only 66% of GGR at RWS (a record low flow through for the property) vs 81% at MBS.

 

The Good

  • At S$999MM, GGR was S$90MM better than we estimated and likely higher than any sell side estimates.  There was volume growth across all segments of the business QoQ.
  • VIP:  RC volume of S$15.5BN was 4% higher than we estimated.  Gross win was S$527MM (S$78MM above our estimate).
  • Gaming machines: we estimate that win was S$178MM on handle of S$3,717MM, a 10% sequential increase

 

The Bad

  • Non-Gaming Revenues Should Have Been higher: 
    • Non-gaming revenues were down QoQ when they really should have been at least flat given the addition of 200 rooms
    • Room revenue should have been up S$3.5MM QoQ with the increase in RevPAR and room count.  
    • USS revenue was down S$7MM QoQ, which implies an S$8MM decline in F&B and other which is odd since those revenues are usually correlated with room revenues.
  • Holy rebates Batman!
    • While Genting management stated that was no change in their rebate policy aside from giving some breaks from early payments of receivables, the numbers tell a different story
    • We saw a huge spike in rebates (including GST and gaming points) in the quarter, which are simply the difference between gross gaming revenue of S$999MM and reported net casino revenues of S$655MM
    • Rebates were S$344MM in 1Q or 34% of GGR. As a point of reference, the rebates as a % of GGR have averaged 29% at RWS so this is a big spike.  In comparison, MBS's rebates were only 19% of GGR.  Put another way, the property's GGR increased S$96MM QoQ but net gaming revenues only increased S$11MM.
      • Here is our estimate of the rebate breakout in the quarter:
        • VIP:  S$239MM or 1.75%
        • GST:  S$47.5MM
        • Mass gaming points:  S$25MM or 1.9% of drop
  • Higher fixed costs
    • It looks like fixed costs increased to S$202.5MM, about S$17MM sequentially.  Some of this is for the hotel rooms coming online.  Unfortunately, non-gaming revenues were down QoQ while costs were up.

 


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