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Profitability of IRs in doubt: Citi analyst

Posted on 13 Sep 2009 | Comments Off

To achieve US$1.56 billion in revenue each, both will have to attract a combined total of 31 million visitors annually.

CAN the integrated resorts count on Singaporeans to gamble enough to make them profitable? Citi has doubts.

UNDER QUESTION
The $100 entrance fee is a sticking point as it could prevent both casinos from developing strong, recurring local mass market clients

In a report on the prospects of Las Vegas Sands (LVS), which owns Marina Bay Sands (MBS) here, Citi said that assuming MBS contributes 20 per cent of LVS’s total Ebitdar in its first full year, every eligible Singaporean will have to go to the casino five times a year and spend more then the average visitor to Macau.

Every visitor to Singapore will also have to visit once a year.

‘We liken the current sentiment towards the integrated resort to the Macau gaming boom in 2006/07 and urge investors to not be left holding this parcel when the music stops,’ added Citi analyst Anil Daswani.

Mr Daswani acknowledges that his forecast of 20 per cent Ebitdar from LVS’s Singapore operations is about 30 per cent below consensus. But he also added: ‘If current market estimates are believed, then the Marina Bay Sands will be the most profitable casino in the world in its first full year of operations despite Singapore being a fledgling gaming market.’

Singapore is an untested market as far as gaming goes. Whether Singapore leans towards the Las Vegas model (which counts on non-gaming revenue) or the Macau model (which relies on VIP gamers), will have a significant impact on revenue generators here, and ultimately, the success of the IRs.

Forecasts for gaming revenue at the IRs so far range between US$1-2 billion in the first year.

Based on Citi’s analysis, to achieve US$1.56 billion in revenue each, both IRs will have to attract a combined total of 31 million visitors annually.

This implies that 3.2 million eligible Singaporeans (over 21 years) will have to visit either casino a total of five times. An additional 1.4 million visitors from Johor will have to visit either casino twice a year and 12.2 million tourists will have gone at least once with everybody betting and losing at least US$100. Continue reading →

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Tagged Intergrated Resort, Marina Bay Sands

Rising property prices to get airing in the House

Posted on 13 Sep 2009 | Comments Off

THE red-hot property market in Singapore will come under scrutiny on Monday when Parliament sits.At least two MPs – Madam Ho Geok Choo (West Coast GRC) and Ms Jessica Tan (East Coast GRC) – have put in questions on the impact of rising property prices.

Madam Ho is worried that the buying frenzy could result in a property bubble. She told The Straits Times yesterday: ‘If you look at what is happening in Singapore today, everybody is happily going shopping for property. Nobody seems to have concerns that there might be a risk in just going forward like that. It’s very much like what happened in the United States before the sub-prime crisis.’

Ms Tan is concerned about how the price spike may affect affordability. With HDB prices also rising, many have asked if the income ceiling for government housing grants could be raised. Now, any household earning more than $8,000 a month does not qualify for a grant when buying a resale flat.

Ms Tan is bringing up the issue in Parliament, asking when the income ceiling was last reviewed. The property boom, coming amid a global economic crisis, has caught the eye of many, including those in the Government.

National Development Minister Mah Bow Tan had said in July that signs of speculation were reappearing. He stressed that the Government would monitor the situation closely. Continue reading →