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.
