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  • Near-term outlook improving amid recent formation of VTLs with key source markets; traffic at RWS could rebound sharply after limits on arrival from VTL countries are eased
  • RWS expansion delayed by around 2 years; expected to be completed sometime in 2026-2027
  • While GENS’s Yokohama dream may be over, the Group is hopeful on other cities (Tokyo) in Japan
  • Anticipate some near-term margin pressure on lower government support and gaming tax hike, but margins should strengthen when more tourists return. 
  • Maintain BUY with TP of S$1.00
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Question 1: Any updates on RWS 2.0?

Answer: While we’re making some changes to adapt to a post-COVID world, there are no changes to the planned capex of S$4.5bn. We have already made a S$900m payment for the land, the remaining S$3.6bn will be spread out over 4-5 years, and we are hoping to start towards the end of next year. 

Question 2: Was the election of an anti-IR mayor in Yokohama largely unexpected by the Group?

Answer: Yes, we did not anticipate this. The unfortunate thing about politics is that it is highly unpredictable, and Japan was also in the midst of a third/fourth wave at that time, so that translated into some negative sentiment among the locals as well.

Question 3: Now that Yokohama is out of the picture, is GENS targeting to expand into any new gaming markets?

Answer: We do not see that many opportunities out of Japan and Singapore for now. We spent a lot of time studying the Japan market, and believe that it would be an ideal fit to the Group. Thus, we remain focused on Japan at this point in time, and will consider other cities in the country if new opportunities arise. Tokyo could potentially enter the IR race as well, but nothing is definite for now. 

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Question 4: Under what circumstances could GENS consider share repurchases or raising dividends?

Answer: This depends on whether we are able to identify new expansion opportunities. We currently have about S$3.2bn of cash, but we have to be cautious given the protracted pandemic and a considerable portion of our cash is earmarked for RWS2.0.  

Question 5: Is GENS in discussions with the government on the gaming tax hike or extension of IR exclusivity in Singapore?

Answer: No, we have not began discussions with the government on both fronts yet. 

Question 6: With the clampdown on the gaming sector in China, how will GENS cope with lower VIP gaming demand?

Answer: We did anticipate this to happen, and diverted our attention away from the Chinese VIP market over the past few years prior to the pandemic, and pivoted to the premium mass market. We have cut back on our marketing efforts in China to focus more on attracting premium mass gamers from countries like Indonesia, Malaysia and Vietnam. 

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Question 7: Although RWS will likely see more visitors in the near-term, how do you think margins will trend with the gaming tax hike and decline in government support?

Answer: Yes, we could see some margin compression in the near-term, but the impact should be manageable as we have several initiatives to cut costs and drive yields. 

For example, we have incorporate automation across our operations. We now use facial recognition technology at the front and back of the house, eliminating the need for security guards. We are also experimenting new technology on the casino floor to reduce the amount of manpower needed as well. Hence, we believe that we can handle pre-crisis visitorship at RWS2.0 with notably less manpower than before. 

On yields, COVID has helped us to rethink our strategy. We started experimenting with the premium segment, and launched a special Halloween event with tickets priced at S$248, instead of the usual S$81-90. We will continue to create more high yield products to entice premium customers from our key source markets.

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Question 8: What is the near-term outlook given the recent extension of VTLs to some important markets like Malaysia, Indonesia and India?

Answer: Yes, we are encouraged by the VTLs, but we think the short-term focus will primarily still be the domestic market, given that the capacity on arrivals is still quite limited at this point in time.