February 25, 2010
Game on as MBS gears for April 27 opening
Second casino will split punters, show real size of market
By ARTHUR SIM
(SINGAPORE) With Singapore's first casino hogging the headlines and the clientele so far, the second one has edged its way into the picture by announcing that it will open for business on April 27.
Las Vegas Sands (LVS) made the surprise announcement yesterday that its Marina Bay Sands (MBS) casino will get rolling in about two months, leaving market watchers speculating on the timing of the news so far in advance of the opening.
Some believe that LVS may be under pressure from its bankers to give some indication on when MBS can start generating cash flow.
LVS, which has operations in the US and Macau has total debt of about US$11 billion and approximately US$5.85 billion of cash, cash equivalents and available sources of liquidity.
If LVS's bankers are nervous, it is likely due to the turnout at rival the Resorts World Sentosa casino which has been seeing about 21,000 punters a day - relatively low, compared to new casino openings in Macau.
Analysts at Nomura expect this number to fall further with MBS claiming its market share. 'With hardcore gamblers increasingly being deterred from entering the casino, we see significant downside risks to the unrealistically high expectations on the potential size of the casino gaming market by consensus,' it added.
Earlier earnings projections by LVS may now be unrealistically high. In December 2009, LVS chairman Sheldon Adelson had said that MBS could rake in about US$1 billion annually before deducting interest, taxes, depreciation and amortisation expenses.
While some market estimates range between US$400 million and US$800 million, Citigroup has projected a 2010 Ebitda of as low as US$248.8 million in a recent report.
Citigroup also visited the MBS site recently and said: 'Post our recent site visit in January, we remain sceptical that MBS will be ready to open by April.'
Bank of America Merrill Lynch analyst Melvyn Boey noted that LVS estimates have been 'fairly bullish' so numbers will have to pick up to achieve earlier forecasts.
Market watchers believe another reason for LVS's announcement is try to expedite the award of the casino licence in the light of Resorts World Sentosa casino opening with less than 50 per cent of the integrated resort operational.
The MBS casino will open together with about 40 per cent of its hotel rooms, part of the retail mall and convention centre, as well as some F&B outlets, 'subject to construction proceeding as scheduled and being able to attain the necessary regulatory approvals'.
LVS said that the Sands SkyPark, the Event Plaza, the remaining hotel rooms, more shops and F&B outlets will open on June 23.
This will be followed by the two theatres in October and the Marina Bay Sands museum in December.
Giving some clarity on requirements for the casino licence, a spokesman for Singapore Tourism Board said: 'One of the requirements for issuing the casino licence is that at least half of the integrated resorts' gross floor area has been completed and at least half of the committed investment has been expended.'
Vivian Heng, spokeswoman for the Casino Regulatory Authority (CRA) added: 'CRA issued the casino licence to Resorts World Sentosa on 6 February 2010, after Resorts World Sentosa fulfilled the requirements for casino licence issuance.'
CRA added that MBS needs to obtain other regulatory approvals (eg surveillance plan, internal controls systems) before the casino licence is issued. 'Marina Bay Sands is in the process of clearing the required steps for casino licence issuance,' it added.
Regardless of whether LVS gets its casino licence in time, MBS will have to open if only because it is committed to welcoming delegates of the Inter-Pacific Bar Association' s annual conference within days of the April 27 deadline, with Al Gore said to be one of the speakers.
Apart from competing for casino business, RWS has also emerged as a rival for some of MBS's meetings, incentives, conventions and exhibitions (Mice) business too.
Still, Jonathan Galaviz, an independent travel and leisure sector strategist believes MBS has a clear advantage here. 'I would expect that both RWS and MBS will compete for smaller scale Mice events with MBS of course having the stronger competitive advantage for the larger ones,' he added.
Martin Koh/ Sherry Tang