Sinagapore appears to be off to a strong start for Genting and LVS. Here are our notes.



Overall Market:

  • Currently, VIP/Mass is roughly 50/50.
  • Commissions paid on direct VIP play are based on a percentage of Rolling Chip (RC) buy-in and the number of times the initial buy-in is turned over, plus 0.1% of RC towards expenses (rooms & F&B allowance)
    • Commissions are accounted for as rebates (i.e. contra-revenue deductions against gross gaming revenues)
  • In order to qualify for the lower 5% VIP tax rate, players must:
    • Buy-in with a minimum of S100,000 – which allows the government to document how much and where the cash came from
    • Inform the CRA (Casino Regulatory Authority) one hour before play
    • Follow anti-money laundering rules (unlike in Macau, you can’t just come with a bag of cash and play)
    • Declare win/loss to the government
    • The min S$100,000 initial buy-in qualifies a player as VIP for 12 months – regardless of how much he gambles on repeat visits
  • Marketing for both properties has been very limited thus far.  Marketing of the casino is prohibited in Singapore; however, the properties can market their other attractions but have postponed large marketing efforts pending their respective “grand openings.”
  • Given that a lot of the Singaporean players are “new gamers,” the house advantage may be abnormally high initially
  • Despite a different mix of table games (i.e. more roulette) than Macau, hold rates should be similar.  MBS doesn’t have insurance on its bets, while RWS does.  Insurance increases the house advantage but also slows play so there is a trade off.  Insurance is popular with Southeast Asian players


Junket operations:

  • There are no licensed junkets at the moment but currently there are around 30 junket operators that have submitted with the CRA.  Likely that half a dozen junket operators will get licensed by the end of July.
  • In order to operate at either RWS or MBS, the properties must sponsor the junket’s license application.
    • MBS is not sponsoring any of the junkets applications at this time and will take a wait and see approach for now
    • Genting is sponsoring several of the junket applications and is happy to do business with junket operators
  • Some of the junket operator applications are from Singaporean-based junkets and have already been sourcing and providing credit to Singaporean customers who play at Genting’s Highlands Malaysian property Malaysia and Star Cruises ships operating in the vicinity.  Most of these junket operators already have strong ties with Genting, and hence it makes sense that Genting is welcoming their business and sponsoring their applications.
  • We have heard that Genting currently has “junkets” currently buying in millions of rolling chips and distributing them to their clients in the form of credit
  • We think that the government may over time loosen licensing requirements for junket operators, but that will take time
  • We think that the rolling chips generated by junkets will be a relatively small percentage of the VIP market given the licensing hurdles



  •  State of the property & completion schedule
    • Casino:
      • Started with 70 VIP and 442 mass tables
      • Have the ability to operate up to 139 VIP tables and up to 650 Mass tables
      • Currently operating 127 VIP tables and have 28 private salons on the 3rd and 4th floors
      • Started with 1,450 slots and can get to 1,650.  They are also adding over 300 electronic tables games (roulette)
      • 3rd floor is premium mass play and 4th floor is VIP play
      • RC programs start with buy ins of S$50k
    • Hotel:
      • Currently 963 rooms are open (up to the 22nd floor), with the remaining rooms opening just after the opening party on June 23rd
      • Will likely comp between 20-30% of the rooms but it remains to be seen
    • Retail:
      • Approximately 90% of the retail space is currently leased and 20% of the space is currently open
      • They hope to have 70% of the space open by September, 95% by December and grand opening of the Louis Vuitton space by 1Q2011
    • Other:
      • Museum should open by Dec 2010
      • Sky park will be partly open by the grand opening and complete by August
    • Spending:
      • As of March 31st, they had $1.4bn in cash left to spend, $1bn to be spent in 2010, and $400mm in 2011
  • Commissions & VIP play:
    • For the first month of operations, MBS offered very low commissions ranging from 0.3% to 1% of RC plus 0.1% toward expenses
    • Subsequently, commissions were raised to 0.6% to 1.4% of RC plus 0.1% toward expenses
    • Despite very low commissions, the first month of operations produced strong volumes, which subsequently dropped and then resumed growth once commission levels were raised to market levels
    • Roughly 60% of the VIP players are currently Singaporean but that number is a bit misleading since there are many Malaysians and Indonesians who are permanent residents in Singapore
    • While an initial minimum buy-in of S$100,000 qualifies a player as VIP (i.e. 5% tax rate), all the programs have 30 days lives which require fresh buy-ins.  Almost all the VIP players at MBS buy in to various commission programs.
  • Visitation:
    • Have a bus terminal with 60 buses, but it isn’t fully up and running yet
    • Current visitation mix is roughly 30% Singaporean, 40% Malaysian, and 30% Indonesian
    • Currently have more than 20,000 average daily visitors coming through the casino and believe that they will get to 60-100k on weekends when they are fully open
    • Vast majority of Singaporeans just pay the daily S$100 fee rather than the S$2,000 annual fee
  • Mall:
    • Believe that the mall will be a big shopping destination
    • Tenant terms:
      • Base rents: $150-$200, closer to $150 when you net their free rents and TI incentives
      • Term: 3-5 years
      • Percentage rents: 7-12%
      • Sheldon thinks that the mall can do $200mm of NOI but $100mm ramping to $150mm is probably a more realistic assumption
  • Costs:
    • Have 7,000 employees now and will likely have 7,700 when they are fully open (excluding the retail employees for whom they are not responsible).  Average yearly salary of $30k/year is a reasonable assumption.
    • Marketing/HVAC/other expenses are roughly $20-25mm per month.
  • Credit granting:
    • Usually know in advance when an incoming big player would want credit.  They have an extensive credit approval process and are supposedly taking very large reserves



  • Have a huge bus interchange--120 buses daily to and from Malaysia.
  • A high percentage of visitors from Malaysia are already their players but the Genting Highlands hasn’t taken much of a hit
  • Phase 2 will be completely open by the end of 2011 and will cost an incremental S$2.6BN to complete.  Phase 2 will consist of:
    • Arcade and Asian food court (“hawker” food) on the waterfront which is opening in 2 months
    • Maritime museum with a massive aquarium
    • 2 more hotels--all suites are underground and have “ocean” views which will open in mid-2011
    • Waterpark will open at the end of 2011
  • Universal Studios:
    • Designed to handle up to 25k daily visitors people.  Currently, they are capping the number of ticket sales to 8k mid-week and 10k on weekends
    • The park is sold out for the whole month
    • It should be fully open within a few months, at which time they expect to be selling between 15-20k tickets per day
    • Haven't even started marketing the park yet
    • Ticket prices range from S$66-74/ day (depending on whether they are peak or off peak purchases)
    • Pay Universal a royalty fee but operate the park themselves
    • At current visitation levels, the park is still EBITDA negative
  • Have about 10,500 employees that make roughly S$2,000-2,500/month
  • Hotel occupancy currently at 75% right now
    • Festive (the family hotel with 400 rooms) is almost entirely cash
    • Crockfords (120 suites) is 100% comped and for VIP players only
    • Hotel Michael (300 rooms) is roughly 40% comped
    • Hard Rock is roughly 30% comped
    • Rates are roughly S$300-350
  • Casino details:
    • They are currently operating more than 300 tables and have the ability to operate up to 500 tables
    • Opened with 1,200 slots but now have roughly 1,500-1,600 slots. Can have up to 2,000 machines
    • Orchid club for Singaporeans only
    • Despite huge gaming volumes, they still believe that their business is ramping, as marketing of the property has only just started
    • Smoking is permitted in 70% of the casino, but they have designated only 50% of the space to smoking areas
    • Maxims is their members-only premium, mass casino with 8 private salons with minimum bets of S$500 and Crocksford is their VIP casino with minimum bets of S$2,000 and has 14 private salons
    • Commission rates on various buy-ins and turns (add .1% for comps to all levels):
      • S$30-99k: 0.6%
      • S$100-999k: 1%
      • S$1mm-1.99mm: 1.1%
      • S$2-4.99mm: 1.2% - 1.3% (depending on number of turns)
      • > S$5mm: 1.3-1.4% (depending on number of turns)
    • A fair amount of players don't want to register for programs in order to remain anonymous; hence, they get no rebates/commissions.


"Market Rumors"

  • Genting is rumored to be at risk of investigation by the CRA for running illegal junket operations, loan sharking, and side insurance betting
  • MBS is rumored to be subject to government fines for its delayed opening

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