SOME THOUGHTS ON SINGAPORE

We met with Genting management yesterday and have some takeaways.  We think the junket issue may be the biggest obstacle to a quick ramp.

 

JUNKET ISSUE:

  • Rules on junkets and other operations are due to be released any day now
  • Genting thinks that junkets will be important, but less so than Macau
  • The Singapore government wants more power to reside with the operators given the significant investment LVS and Genting have made
  • Tough regulations won't block the junkets out entirely
  • If they wanted to they could pay out up to 1.8-1.9% to junkets, but aren’t planning on going that high

DIRECT VIP PLAY:

  • In response to having direct VIP play if the junkets can’t get licensed: they still have the collections issue if players are from China - taking RMB out of the country and then collecting
  • A lot of the VIP play will still come from China but they also see India as a big untapped market
  • Expecting a significant number of players from South & South East Asia (Indonesia, Singapore, Vietnam, Cambodia, Thailand, Japan, etc) since there are tons of direct flights in to Singapore
  • Believes that VIP mix (Direct and Junket combined) will be 65% in Singapore

SANDS VS GENTING:

  • Sands will have approximately the same number of tables as them
  • Genting’s site is more of a resort destination/family-oriented spot, while Sands will more “businessy”
  • Genting will still attract a lot of MICE  business, however
  • With Universal Studios and their complex adding to the night safari and the existing volcano and beach attractions, Genting thinks that Sentosa will have the critical mass of “stuff” to become a destination location like Atlantis
  • $1BN of EBITDA from either Sands or Genting is unrealistic expectation.  Genting thinks $750mm in EBITDA is reasonable for them and for Sands
  • They will have 8,000-9,000 employees in Phase 1 and 12K when  Phase 2 opens
  • Genting doesn't believe Sand’s fixed cost base will be lower than it is at Venetian Macau

IMPACT ON MALAYSIA OPERATIONS:

  • Cannibalization from Highlands - street 5-10%, stock implies more - thinks it’s not going to be that much because 90% of clients are Malaysian
  • ADR guidance: 250 Singaporean
  • Highlands VIP mix is 30%, of which 50% is junket