LVS: SINGAPORE “CONCERNS”

Is Singapore really as bad as the shorts say?

 

 

There has been some concern in the investment community recently surrounding next year’s performance by MBS.  Management has apparently been conservative, telling some that EBITDA may be flattish in 2013.  To this we say the following:  1) current Street consensus already reflects that assumption and 2) EBITDA will likely grow in 2013 despite management’s assertions.

 

It looks like Street consensus for MBS EBITDA is below $1.7 billion for 2013 on top of an estimated $1.6 billion for 2012.  That looks pretty flattish to us.  Following a disappointing Q2 in Singapore, Street expectations have come down.

 

It’s probably prudent for management to rein in the aggressive analysts.  The new IR function at LVS seems to be more conservative overall:  a longer and formal quiet period, limited access to property level managers, and a less aggressive tone.  The truth is, management probably has limited precision when it comes to projecting 2013 EBITDA.

 

We may not have perfect precision either but here is why we think EBITDA will grow next year.  Given the valuation and investor concerns, we think EBITDA growth at MBS will be a positive catalyst on the margin:

  • The locals business may indeed be flat or slightly down in 2013 but that represents 30% of visitation and likely less of revenues.  We’d be shocked if international visitors do not more than make up the slack.  It would likely take an Asian recession for that to happen.
  • Even if the market is flat next year, MBS should gain share.  Genting has greater exposure to the locals business.
  • MBS retail and room rates should be up significantly next year.
  • MBS should also continue to benefit from increased visitation to their Marina Bay area, resulting from:
    • MRT station: Opened in January right by the property (should benefit MICE)
    • Gardens By The Bay in Marina Bay: A $1 billion project that ppened 6/29/12
    • Deep water cruise terminal: Opened in early June of 2012

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