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The Call @ Hedgeye | March 28, 2024

3Q results as expected


"The global economic outlook continues to be uncertain but the Group remains optimistic in achieving a steady income from this region. Together with a healthy cash position, we are well placed to capitalise on investment opportunities that create shareholder value in the short and medium term."

CONF CALL NOTES

  • Gained gaming market share for the 2nd Q in a row
  • Mass market remained flat
  • Non-gaming business remained robust
  • In the coming weeks, they will be opening the Marine Life Park 
  • They will target a larger customer base and expand their international marketing efforts with the completion of the Marine Life Park
  • They expect continued pressure on their EBITDA margin as the Marine Life Park ramps but better margins in 2013
  • Economic recovery seems elusive
  • They are actively looking at ways to increase their room inventory, which remains constrained

Q&A

  • GGR market share is 51%
  • RC volume share is 49%
  • Mass share is 47%
  • Potential of Japan gaming:  thinks that the current government headed by the DPG will have a shortened life span and will call elections sometime next month. That means that there will be a new government over the next 3-4 months. They are hearing that the new government will be interested in liberalizing gaming. Very positive that legislation will be enacted next year.
  • VIP rolling chip % was about 2.8%
  • Receivables on VIP side:  Receivable is lower QoQ. Bad debt provision is almost the same as last Q.
  • They will continue to be cautious but it's on a case by case basis. So they are more cautious with new client credit extensions vs. existing clients. 
  • They are still offering some discounts to customers to pay debts in the first 14 days
  • $9MM of pre-opening expenses related to the Marine Life Park.  Pre-opening costs are those specific to the Park only before it opens. However, once the Park opens, they cannot write-off the expenses as pre-opening. Only from 2Q next year will EBITDA margins creep up. 
  • Mass market volume was down 3% QoQ.  But the win was up 1%. 
  • Slot volume was down 4% QoQ
  • The local numbers (Singaporean) have gone down and those just across the border have gone up slightly. They hope to increase their Singaporean #s next year. 
  • Will begin marketing to the Russian and Middle Eastern market next year which they haven't done before
  • Will continue to suffer a little bit more on the local side of the market
  • Net gaming revenue mix: Rolling win is 28%
  • Took a bit of cost out of the property.  They understand how to be more efficient. Used to operate 4-5 shifts but now they operating 7-9 shifts and so they can better match labor needs. Had 14,000 employees and today have 13,200. Target is to reduce their total employee base to under 13,000. Singapore is going through a labor crunch right now. They are trying to bring more labor efficiencies
  • Their undisclosed investments are within their core industries and expertise. 
  • Paid 5 1/8% interest on the perpetual securities so that is their minimum hurdle on their portfolio investments.  Usually north of 10%.
  • Looking at the Echo share price today, it looks like they made the right decision to sell the stock. The loss on their statement is the entire loss in relation to the sale.
  • Most of the cash sits at the Genting Singapore level. All of the debt sits in the Resorts World level. Genting Singapore has lots of cash but no direct borrowings since all the borrowings are at the IR level. 
  • Write-offs during the quarter? Exchange loss is just a pure FX loss. Other write-off just standard practice.
  • In terms of local marketing, they are just marketing local attractions, MICE marketing and "wedding marketing"
  • Thailand is still really weak and Vietnam has fallen off a cliff. Greater China still has great potential. There are more low cost flights between Singapore and China that have come online and are continuing to come online. 
  • The F&B numbers have actually gone up slightly QoQ
  • Commission rates on VIP have actually gone down slightly.

HIGHLIGHTS FROM THE RELEASE

  • Genting reported net revenue of S$670MM and Adjusted EBITDA of $303MM
    • RWS net revenue of $662MM and Adjusted EBITDA of S$304MM
  • Comparing to the second quarter of 2012, overall revenue and adjusted EBITDA was affected by a lower win percentage in the premium player business. 
  • Other business segments remain healthy with Universal Studios Singapore (“USS”) recording a daily average visitation of 9,100 visitors and average spend of S$86. The hotel business saw an increase in occupancy rate to 93% with an average room rate of S$432. 
  • As the Marine Life Park (“MLP”) moves into its final pre-operations phase, we continue to incur pre-opening operating costs without corresponding revenue.
  • During the financial period ended 30 September 2012, the Group invested in a portfolio of quoted securities, unquoted equity investment and compounded financial instruments amounting to a net total of S$1,262.2 million. The Group also spent a total of S$376.9 million for construction work-in-progress and other property, plant and equipment during the financial period.
  • We continue to add new products and events to enhance Resorts World Sentosa (“RWS”)’s appeal as an exciting destination resort. In October, the second edition of Halloween Horror Nights in Universal Studios Singapore was a sold-out event, a sign that the park is earning brand equity with consistent delivery of products and signature events. In the first week of November, we opened to encouraging audience response our latest production - the magic spectacular Incanto
  • RWS will soon open one of its major signature attractions - the Marine Life Park (“MLP”). The MLP is positioned as a premium leisure product. Over the next few months, we will gradually build up capacity in the MLP and as such, EBITDA margins will continue to be constrained for the rest of the year and early part of next year
  • On 7 December 2012, we will celebrate the Grand Opening of our RWS Integrated Resort with a host of festivities that will signify the dawn of one of the world’s most exciting and enjoyable destination resorts.
  • Looking ahead to 2013, the full opening of RWS will allow us to capitalise on sales and marketing initiatives that appeal to a wider base of affluent travellers and new markets.
  • The Company’s operating activities continue to generate steady cash flow. In 2013, we expect cash flow to improve as our capital expenditure reaches steady state and the new attractions in our West Zone bring in additional revenue.