MBS 2Q22: Steep Gaming Volume Recovery; Trending Closer To Pre-pandemic LevelsMBS delivered an impressive quarter with 2Q22 net gaming revenue recovering 90% qoq to exceed pre-pandemic levels. This was supported by excellent local patronage and a robust mass market segment (mass volume recovered to 79% of pre-pandemic levels), as well as the strong recovery of international visitors and the VIP market segment (VIP volume recovered to 76% of pre-pandemic levels). Overall, we remain confident Singapore’s casinos are well-positioned to ride on the strength of the nation’s tourism recovery and expect 80-90% GGR growth in 2022. Maintain our OVERWEIGHT call for the sector and BUY call for Genting Singapore.
· MBS: Resilient gaming volume recovery. Las Vegas Sands’ (LVS) 2Q22 results reveal that Marina Bay Sands’ (MBS) adjusted EBITDA surged 185% yoy to US$319m (hold-normalised adjusted EBITDA improved 187% yoy to US$278m), the highest quarterly figure since the onset of the COVID-19 pandemic. MBS’ 2Q22 net gaming revenue also recovered 90.1% qoq to hit 108% of pre-pandemic levels. On a constant currency basis (in Singapore dollars), 2Q22’s mass market (table and slot) gross gaming revenue (GGR) rose 71% yoy and 44% qoq, while VIP GGR surged 507% yoy and 276% qoq. Mass:VIP GGR mix for tables (ie excluding slots) stood at 48:52 in 2Q22 (1Q22: 69:31, 2Q21: 72:28). MBS’ 2Q22 EBITDA margin also improved to 47.0% (1Q22: 30.3%, 2Q21: 34.3%).
· Mass market: Stellar mass volume coupled with higher win rates. In Singapore dollars, we estimate that MBS’ mass market non-rolling chip volume rose 113% yoy to represent the highest quarter since 2Q20 (96% of pre-pandemic levels), while slot handle improved 34% yoy to a historical high and exceeds pre-pandemic levels. With higher overall mass volumes at +143% yoy and higher win rates, mass table GGR surged 117% yoy while slot GGR surged 37% yoy in 2Q22. The overall mass market GGR improved 71% yoy.
· VIP: RCV increased meaningfully yoy, lifted by lower win rates. On a constant currency basis, we estimate MBS’ 2Q22 rolling chip volume (RCV) rose 811.2% yoy (+189% qoq) and represented 76% of pre-pandemic levels, mainly due to Singapore’s lifting of border restrictions. Furthermore, the stronger RCV was supplemented by a higher win rate of 4.29% in 2Q22 (1Q22: 3.3%), resulting in a 279% qoq increase in GGR. Meanwhile, RCV improved 811% yoy. Despite the win rate plunging to 4.29% (2Q21: 6.44%), VIP GGR spiked 507% yoy in 2Q22 on much stronger RCV.
· RWS: Expecting a similarly solid quarter with significant gaming volume recovery. We expect Resorts World Singapore to deliver a similarly commendable GGR as MBS in 2Q22, which represents >100% of pre-pandemic levels. With the world eventually fully unwinding COVID-19 curbs, we expect Genting Singapore’s EBITDA to claw back to the pre-pandemic level of S$1.2b in FY23 as the worst is likely over. Meanwhile, we also expect international visitors to trickle in with Singapore relaxing social distancing measures and border restrictions.
· Maintain OVERWEIGHT as we anticipate strong GGR recovery after Singapore’s border opening. Singapore has scrapped the previous quota-based Vaccinated Travel Lane arrangement and replaced it with a new Vaccinated Travel Framework which allows fully-vaccinated travellers to enter Singapore free of quarantine and on-arrival tests. Since 26 April, pre-departure tests are no longer required for inoculated travellers to enter Singapore. Subsequently, we expect the gaming industry to benefit from surging international patronage and GGR.
· Maintain BUY on Genting Singapore with a target price of S$1.08, which implies 8.8x 2023F EV/EBITDA (-0.5SD below mean). We continue to expect the cash-flushed company (net cash accounts for 33% of market cap) to engage in significantly better capital management moving forward.