By Anshuman Daga
SINGAPORE Feb 24 Singapore's two
multi-billion-dollar casinos bear evidence of China's economic
recovery: high rollers returned in force last quarter to the
resorts run by Genting Singapore Plc and Las Vegas
The revival in the lucrative VIP segment reversed a pattern
that analysts had observed in recent quarters, where whenever
one company saw a rise in VIP business, the other usually
reported a slowdown, suggesting that the two casinos were
fighting over a limited pool of punters.
But over the last three months of 2012, both Sands and
Genting reported strong year-on-year growth in that segment.
Genting's results, released late on Thursday, showed a 56
percent jump in its premium segment. Sands, whose earnings were
released on Jan. 30, posted a 53 percent increase in what it
calls rolling chip, a gauge of gambling activity in high-stakes
The jump in the high rollers business was accompanied by a
sharp rise in credit to gamblers - for Genting, receivables were
up 33 percent from a year earlier to S$960 million ($775.69
million) - which some analysts cited as cause for concern
because it could lead to an increase in bad debts.
"It is a chicken-and-egg thing. So, the more you gamble, the
more credit I'm willing to extend to you," said Carey Wong, an
analyst at OCBC. "It is a self-fulfilling thing."
"They made no secret that a lot of the VIPs are also
Chinese. So, with the more stable political climate and
hopefully, economic climate, then you see more Chinese high
rollers coming into town," said Wong.
China typically accounts for at least half of the VIP
gamblers in Singapore, Asia's second-largest gambling market
after Macau, with the rest coming primarily from Indonesia and
Malaysia. Singapore's casino business had slowed earlier in 2012
when China's economy cooled.
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Citigroup analyst George Choi said he was surprised Genting
was able to get "more and more new VIP players".
"In the past quarter, we have finally seen a recovery (for
both operators) and my guess is we have hit a bottom," said
Choi, who upgraded his rating on Genting Singapore to "buy" from
"neutral" on Friday.
Singapore has only two casinos, which opened in 2010, but
they are among the most lucrative in the world, with profit
margins as high as 50 percent. Both are part of what Singapore
calls integrated resorts, connected to shopping and
entertainment centres that pad the gaming profits. The two
casino operators were hit by a slowing market and tighter local
regulations in 2012.
Local citizens must pay a levy to enter the casino, part of
Singapore's effort to curb problem gambling, so attracting
foreigners is especially important - and big-spending VIPs are
the prize. These gamblers are lavished with perks such as stays
at luxury villas, fine dining and casino credit.
Genting said it was comfortable with the amount of credit it
had extended, but Sands called Singapore "the most challenging
credit market" for collecting on debt, which suggests the
companies could face bigger write-offs in the coming quarters.
"You're giving away a lot of credit to a smaller number of
people, and you don't have the legal remedies you have here in
the U.S," Robert Goldstein, president of global gaming
operations for Las Vegas Sands, said in a conference call
accompanying the company's quarterly results last month.
Genting is stockpiling cash as it looks for regional
acquisitions. Japan is high on its wish list if gambling is
approved there, as many analysts expect. Genting, however, said
it does not expect any significant spending in Japan for at
least two years.
Choi said Genting is one of the favourites if and when Japan
decides to legalize casino gambling.
The company's cash pile rose to S$4.4 billion as of the end
of 2012, up from S$3.3 billion a year earlier. With most of the
outlays to develop its Singapore resort - including a marine
life park, an amusement park and high-end hotels - largely done,
its cash pile will likely continue to increase.
It is closely looking at acquisitions over the next 12
months and is interested in significant regional deals, company
officials told analysts in a teleconference late on Thursday.
Genting said in a statement the group is actively pursuing
targets in its core gaming, hospitality and leisure sectors.
Genting Singapore's shares have been the best performer in
the index over the past three months, up 27 percent
after underperforming last year.