Saturday January 23, 2010
http://biz.thestar.com.my/news/story.asp?file=/2010/1/23/business/5531730&sec=business
PETALING JAYA: The exuberance surrounding Resort World Sentosa
might be overdone and one broker has now recommended investors
switch their focus on Genting Malaysia for value instead of its
Singapore counterpart.
Citigroup said expectations surrounding Resort World Sentosa
were too bullish, making Genting Singapore the world’s most
expensive casino stock.
“According to Bloomberg consensus, Resort World Sentosa
will be the world’s most profitable casino by 2011, implying
Singapore will be generating twice the revenues of Malaysia. We
strongly disagree,” it said.
“Not least because if consensus estimates are to be believed,
Resort World Sentosa would be the most profitable casino in the
world in its first full year of operation (2011), a proposition
that truly stretches the imagination.”
At the core of Citigroup’s estimates are visitor projections and
just how much money is going to be spent by each person at the
resort.
Even though it says its 2011 earnings before income tax,
depreciation and amortisation (ebitda) estimates for Resorts World
Sentosa were around 30% below consensus and projects Resorts World
Sentosa generating revenue of US$1.2bil in 2011, those were
aggressive as the consensus numbers call for Resorts World Sentosa
starting operations with a bang, something that they feel is
unlikely given the greenfield nature of the casino.
The broker said its forecasts seem aggressive, as they assume
every single visitor to Singapore would visit either of the
integrated resorts once and that every eligible Johorean would go
twice to the resort. Furthermore, estimates counts on every
Singaporean above 21 years of age visiting the casino five times a
year and outspending the average visitor in Macau.
Estimates have projected that each visitor to Resorts World
Sentosa would spend US$100, which is 51% higher than that typically
spent at Genting Malaysia’s casino (US$66) and higher than the
average spend at the Venetian Macau (US$84). That does not include
the additional S$100 entry levy that each Singaporean must pay when
they enter the casino.
Calling a sell on Genting Singapore, Citigroup gives another
example why the market expectations were too high for Singapore’s
Integrated Resorts.
“According to consensus, Resorts World Sentosa and Marina Bay
Sands in their first full year of operations will achieve combined
gross gaming revenue equivalent to 50% of Las Vegas at about
US$4bil. We estimate the total market size in 2011 to be at
US$2.8bil, around 35% below consensus,” it said.
Citigroup feels Resorts World Sentosa would take significantly
longer than currently forecast to achieve the level of visitor
arrivals needed to meet the market’s revenue and ebitda projections
for its gaming and theme park products.
The broker, however, has called a buy on Genting Malaysia,
calling it the world’s most profitable casino. It expects revenue
to fall by 12% by 2011 compared with 2009 due to cannibalisation
from Singapore but said that both markets were different entities
and the issue of Genting Malayssia losing its 7% of Singaporean
visitors as overplayed.
Citigroup expects Genting Highlands’ mass market day trippers
(72% of visitors) to remain loyal due to the huge price
differential in the two models. Resorts World Sentosa’s hotel rates
are 7 times those of Genting Highlands.
