Genting S'pore shares soar 8.7% to $1.99
Strong gains come amid upbeat calls raising price target
By GRACE LEONG
SHARES of Genting Singapore continued to post strong gains yesterday, unfazed by government measures over the past week to alleviate concerns about social gambling problems, with at least one analyst raising the mainboard-listed casino operator's target price to a new high of $3 a share.
Genting Singapore shares jumped 8.74 per cent, or 16 cents, to close yesterday's trading session at $1.99. More than 204 million shares changed hands.
In a report released yesterday, CLSA Asia-Pacific maintained a 'buy' call on Genting Singapore, citing high casino revenue growth potential as the two integrated resorts (IRs) have yet to ramp up and as demand from both the local and tourist markets remains robust.
Aaron Fischer, a Hong Kong-based gaming analyst with CLSA Asia-Pacific, raised estimates for the overall gaming market size in Singapore to US$6 billion in 2011 - which he said is similar to the size of the Las Vegas Strip - up from previous estimates of US$5.1 billion.
'Resorts World's Q2 performance was not an anomaly. Even after adjusting for normalised hold rates at both properties, annualised market revenue achieved would be US$4 billion, already 2/3rd of Las Vegas, and both properties have not even fully ramped up,' Mr Fischer said.
While Resorts World didn't provide much detail, Mr Fischer said the company indicated that players from China are among the top gaming contributors, citing anecdotal reports that some Chinese players lost as much as 20 million yuan (S$4 million) in a day.
The CLSA report said the overseas visitors segment has ramped up quickly especially from Malaysia, sustained by high income growth, and that a large majority of tourists are waiting for the two IRs to be completed before booking trips.
While Macau can tap China's huge market, Singapore has Malaysia and Indonesia, both of which are main sources of visitor arrivals and tourist receipts. The report said Resorts World's efforts to link up with various tour agencies in smaller Malaysian towns has helped generate more traffic to the resort.
Upon completion of an escalator connecting Resorts World to VivoCity, via the promenade area, traffic to the resort is expected to improve, Mr Fischer said.
Mr Fischer also downplayed the $100 levy on Singaporeans as a 'light obstacle' in the light of the fact that tables with minimum bets of $50-$100 were the most active at both IRs and given the high number of Singaporeans currently travelling to Genting Highlands in Malaysia or boarding cruise ships to gamble.
But potentially clouding CLSA's rosy view is what Mr Fischer calls 'government backlash given the strong locals market' despite a 'growing recognition of the positive benefits of legalised casinos'.
Case in point is the government response to ban free shuttle services to the IRs following calls by Members of Parliament who voiced fears that such services made it easy for heartlanders to gamble.
The free shuttle services provided by Resorts World since June were available at several HDB town centres including Bishan, Ang Mo Kio, Tiong Bahru, Jurong East, Tampines, Bedok, Bukit Merah, Choa Chu Kang and Bukit Panjang.
Resorts World was going to suspend those services on Sunday following a probe by the Ministry of Community Development, Youth and Sports over concerns about rising problem gambling. But free shuttle services by both Resorts World and Marina Bay Sands were stopped on Friday following directives issued by Singapore's Casino Regulatory Authority.
Marina Bay Sands, which said it never offered free shuttle buses to housing estates in the heartlands, voluntarily suspended on Friday its licensed paid bus routes serving Orchard Road and the CBD/Chinatown area as well as free shuttles that serviced certain hotels. But its free shuttle service for hotel guests heading to and from Changi airport remains in service.
Still, Resorts World is expected to seize a bigger market share in Singapore because of expectations of better operating performance as more tables and slots are added and as Universal Studios ramps up, and that the casino operator will be 'a more aggressive payer of rebates going forward assuming the absence of junket operators', the CLSA report said.
At least two other analysts downplayed the business impact of the free shuttle services' suspension, citing uncertainty over whether the ban is permanent and that accessibility to the resorts from other parts of Singapore was easy and unlikely to deter determined gamblers.
'But if programmes like that are allowed in Malaysia, then it would be more noticeable because of the length of travel and costs involved,' said Vincent Khoo, head of research at UOB Kay Hian. 'I think the free shuttle services benefit a lot of non-gamers but with respect to the players themselves, I don't think a disproportionate number of them would rely on the buses.'
Mark Strawn, vice-president of research at Morgan Stanley in New York, believes the larger issue is the Singapore government's willingness to intervene in the operation of the casinos to protect the local population.
But he said he 'deemed more meaningful intervention in the future unlikely, as the most substantial regulations (tax rates, licences) are explicit in the Casino Control Act, and casino visitation remains predominantly foreign'.
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