MBS 4Q21 Results: Supported By Commendable Mass Market Segment And Lucky VIP Wins
MBS delivered another commendable quarter with 4Q21 net gaming revenue recovering 67% qoq to reach 39% of pre-pandemic levels. This was supported by exceptionally high VIP win rates as well as relatively stable local patronage and mass market segment (mass volume recovered to 78% of pre-pandemic levels). Overall, we remain confident that Singapore’s casinos are poised for a better recovery and expect 80-90% GGR growth in 2022. Maintain MARKET WEIGHT.
• MBS: Delivers positive EBITDA with another quarter of strong domestic patronage. Las Vegas Sands’ (LVS) 4Q21 results revealed that Marina Bay Sands’ (MBS) adjusted EBITDA rose 33% yoy to US$177m (hold-normalised adjusted EBITDA edged down 0.7% yoy to US$145m). MBS’ 4Q21 net gaming revenue also recovered 67.5% qoq to 39% of pre-pandemic levels. On a constant currency basis (in Singapore dollars), 4Q21’s mass market (table and slot) gross gaming revenue (GGR) shrank 15% yoy but rose 26% qoq, while VIP GGR improved 111% yoy and 351% qoq. Mass:VIP GGR mix for tables (ie excluding slots) stood at 54:46 in 4Q21 (3Q21: 80:20, 4Q20: 78:22). MBS’ 4Q21 EBITDA margin rose to 48.1% (3Q21: 6.0%, 4Q20: 41.7%).
? Mass market: Stable mass volume but affected by lower win rates. In Singapore dollars, mass market non-rolling chip volume rose an estimated 44% yoy, recording the highest quarter since the COVID-19 pandemic broke out in 1Q20, but slot handle declined 15% yoy to only about 83% of pre-pandemic levels. With overall lower mass volumes (-6% yoy) and lower win rates, mass table GGR declined 3% yoy while slot GGR fell 22% yoy in 4Q21. The overall mass market GGR fell 15% yoy.
? VIP: RCV increased marginally yoy; exceptionally high win rate. On a constant currency basis, we estimate that MBS’ 4Q21 rolling chip volume (RCV) rose 3.3% yoy but made up only about 80% of pre-pandemic levels, mainly due to Singapore’s border closure and travel impediments that largely reduced international tourist patronage. Nevertheless, the much stronger RCV coupled with exceptionally high win rate of 6.32% in 4Q21 (3Q21: 4.05%) resulted in GGR increasing 351% qoq. Meanwhile, RCV improved 3% yoy. With this, coupled with a much higher yoy win rate of 6.32% (4Q20: 3.09%), VIP GGR surged 111% yoy in 4Q21.
• RWS: Expecting a similarly solid quarter. We expect the more locally-dependent Resorts World Singapore (RWS) to largely sustain its 3Q20 GGR level, which represents about 58% of pre-pandemic levels. Resilient local patronage will continue to serve as a significant interim earnings cushion, while international visitations will also gradually trickle in given Singapore’s travel arrangements with more than 20 neighbouring countries. Another key re-rating catalyst is the wide dispensation of booster vaccines
which will trigger valuations to factor in 2022’s gradual recovery towards pre-pandemic earnings dynamics.
• Maintain MARKET WEIGHT while waiting for full border reopening after progressive booster vaccinations. While there is a silver lining that the booster vaccines are effective against the highly transmissible Omicron variant and the death rate remains low, Singapore is eyeing the resumption of more international travel arrangements and has promised easier travel for fully-vaccinated tourists in the near term upon achieving herd immunity. To note, Singapore has quarantine-free vaccinated travel lanes (VTL) with >20 countries (refer to RHS table). This will allow Singapore’s gaming industry to see a meaningful international footfall recovery which will subsequently lift its GGR prospects.
• Maintain BUY on Genting Singapore (GENS) with target price of S$1.08, which implies 10x 2022F EV/EBITDA (mean). We continue to expect the market to look beyond the waning COVID-19 setbacks and towards an eventual earnings recovery, with the improving momentum in the regional COVID-19 booster vaccination exercise eventually leading to the world treating COVID-19 as an endemic and borders being reopened.