MBS 1Q22: Resilient Mass Segment On Volume Recovery And Lucky Wins
MBS delivered a commendable quarter with 1Q22 net gaming revenue recovering 13% qoq to reach 49% of pre-pandemic levels. This was supported by relatively stable local patronage and the mass market segment (mass volume recovered to 59% of prepandemic levels). Overall, we remain confident that Singapore’s casinos are poised for a better recovery and expect 80-90% GGR growth in 2022. Maintain our OVERWEIGHT call for the sector, and BUY call for Genting Singapore.
• MBS: Delivers another quarter of strong domestic patronage. Las Vegas Sands’
(LVS) 1Q22 results revealed that Marina Bay Sands’ (MBS) adjusted EBITDA declined
16% yoy to US$121m (hold-normalised adjusted EBITDA improved marginally by 4.3%
yoy to US$121m as 1Q21 benefitted from an exceptionally high win rate). MBS’ 1Q22 net
gaming revenue had also recovered 12.7% qoq to 49% of pre-pandemic levels. On a
constant currency basis (in Singapore dollars), 1Q22’s mass market (table and slot)
gross gaming revenue (GGR) shrank 2% yoy but rose 27% qoq, while VIP GGR fell 25%
yoy and 25% qoq. Mass:VIP GGR mix for tables (ie excluding slots) stood at 69:31 in
1Q22 (4Q21: 54:46, 1Q21: 60:40). MBS’ 1Q22 EBITDA margin dropped to 30.3% (4Q21:
48.1%, 1Q21: 33.8%).
• Mass market: Stable mass volume despite lower win rates. We estimate that the
mass market non-rolling chip volume in Singapore dollars rose 20% yoy to represent the
second-highest quarter since the COVID-19 outbreak in 2Q20 (59% of pre-pandemic
levels), but slot handle declined 11% yoy to only about 92% of pre-pandemic levels. With
the overall higher mass volume at +20% yoy but lower win rate, mass table GGR surged
11% yoy while slot GGR fell 13% yoy in 1Q22. The overall mass market GGR fell 2%
yoy.
• VIP: RCV increased meaningfully yoy, but hit by lower win rate. On a constant
currency basis, we estimate MBS’ 1Q22 rolling chip volume (RCV) rose 27.5% yoy
(+43% qoq) and represented 27% of pre-pandemic levels, mainly due to Singapore’s
border closure and travel impediments. Nevertheless, the stronger RCV was hampered
by a lower win rate of 3.3% in 1Q22 (4Q21: 6.32%; 1Q21: 5.59%), resulting in GGR
decreasing 25% qoq and 25% yoy. However, the win rate plunged to 3.30% (1Q21:
5.59%), causing VIP GGR to fall 25% yoy in 1Q22.
• RWS: Expecting a similarly resilient quarter with meaningful gaming volume
recovery. We expect the more local-dependent Resorts World Singapore (RWS) to
largely sustain its 3Q-4Q21 GGR levels, which represent about 58% of pre-pandemic
levels. Resilient local patronage continue to serve as a significant interim earnings
cushion, while international visitations have trickled in with Singapore relaxing social
distancing measures and border restrictions.
• Maintain OVERWEIGHT as Singapore reopens its border. Singapore has scrapped
the previous quota-based Vaccinated Travel Lane (VTL) arrangement and replaced it
with a new Vaccinated Travel Framework (VTF) which allows fully-vaccinated travellers
to enter Singapore free of quarantine and on-arrival tests. From 26 Apr 22 onwards, predeparture tests are no longer required for inoculated travellers entering Singapore.
Subsequently, we expect the gaming industry to benefit from surging international
patronage and GGR.
• Maintain BUY on Genting Singapore (GENS) with target price of S$1.08, which
implies 8.8x 2023F EV/EBITDA (-0.5SD below mean). We continue to expect cashflushed GENS (net cash accounts for 32% of market cap) to engage in significantly better
capital management moving forward.