Genting SP

Genting SP: CLSA maintains O/p with $1.49 TP. House had meetings with LVS and Genting who highlighted the high profit margins at the two integrated resorts, reflecting required the returns on combined investment of $15b. Looking ahead the focus of both the govt and two operators remains attracting high spending individuals both from the major Chinese mkt as well as further afield for RWS. Note that the mass mkt has slowed to single digit growth led by the international visitor arrivals, while the govt is focussed on reducing marketing to domestic players. However, to maintain the growth in mass market SG will need more hotel rooms, almost double the current 5,500 rooms planned to be open by the end of 2014, Sentosa would boost RWS traffic. At present the IMA’s have 2 suites with two tables each or just 2% of the 190 VIP tables (562 in total). This is inline with forecast of growing to 6 tables by year end. 2013 has potential to deliver stronger VIP growth for RWS providing firstly, the Beach Villas are popular with high rollers. Secondly, economic conditions and the liquidity of VIP players improves, otherwise a 30% growth in VIP turnover, would materially impact receivables. With the Japanese government focussed on attempting to double the sales tax from 5% to 10%, it appears to have less resolve to push through the contentious reforms required for casinos in the short term. Thus the main focus for RWS’ development does not appear to be changing imminently. This leaves potential in Vietnam, Korea and moving on the existing Echo holding.