MBS: Impressive 3Q22 Gaming Revenue Recovery; >90% Of Pre-Pandemic Levels
MBS’ 3Q22 net gaming revenue further recovered 4% qoq to about 94% of pre-pandemic levels. This was supported by excellent local patronage and the mass market segment (volume recovered to >100% of pre-pandemic levels), as well as the strong recovery of international visitor numbers and the VIP market segment (volume recovered to 83% of pre-pandemic levels). We expect the sector to deliver 80-90% GGR
growth in 2022. OVERWEIGHT the sector. BUY Genting Singapore.
• MBS: Stellar gaming volume recovery. Las Vegas Sands’ (LVS) 3Q22 results revealed that Marina Bay Sands’ (MBS) adjusted EBITDA surged 2187% yoy to US$343m (holdnormalised adjusted EBITDA improved 2683% yoy to US$334m), recording the best quarter since the onset of the pandemic. MBS’ 3Q22 net gaming revenue also recovered 3.5% qoq to achieve 94% of pre-pandemic levels. On a constant currency basis (in Singapore dollars), 3Q22’s mass market (table and slot) gross gaming revenue (GGR) rose 156% yoy and 10% qoq, while VIP GGR surged 1221% yoy and 4% qoq. The mass:VIP GGR mix for tables (ie excluding slots) stood at 50:50 in 3Q22 (2Q22: 48:52, 3Q21: 80:20). MBS’ 3Q22 EBITDA margin also improved yoy to 45.4% (2Q22: 47.0%, 3Q21: 6.0%).
• Mass market: Further qoq recovery lifted by resilient mass volume. In Singapore dollars, we estimate that the mass market non-rolling chip volume further recovered and rose 12% qoq to represent the highest quarter since the COVID-19 outbreak in 2Q20 (90% of pre-pandemic levels), while slot handle improved 10% qoq to a historical high. The overall mass market GGR improved 10% qoq, reflecting a 10% growth in mass volume and flattish win rate. Mass table GGR surged 13% qoq while slot GGR surged 7% qoq in 3Q22.
• VIP: RCV recovered close to pre-pandemic levels, but win rate fell. On a constant currency basis, we estimate MBS’ 3Q22 rolling chip volume (RCV) rose 29% qoq (+1,504% yoy) and represented 96% of pre-pandemic levels, mainly due to strong international visitations following Singapore’s lifting of borders restrictions. Despite a qoq lower win rate of 3.47% in 3Q22 (2Q22: 4.29%), GGR still increased 4% qoq on the back of strong RCV. On a yoy basis, VIP GGR spiked 1221% from 3Q21’s low base although win rate eased to 3.47% (3Q21: 4.05%), mainly reflecting a steep recovery from the lacklustre foreign patronage during Singapore’s border closure in 3Q21.
• RWS: Expect a better quarter with gaming volume recovery. We expect Resorts World Singapore (RWS) to deliver a positive GGR trajectory in 3Q22, although RWS’ volume dynamics will trail MBS’ to partly reflect reduced hotel capacity. With the world eventually fully unwinding COVID curbs, we expect Genting Singapore’s (GENS) EBITDA to claw back to the pre-pandemic level of S$1.2b in FY23. Meanwhile, we also expect GENS’ gaming revenue to recover significantly in 3Q22 in tandem with the influx of international visitors to Singapore following the removal of most pandemic-related social distancing measures and border restrictions. Furthermore, RWS will benefit from Singapore’s overall pent-up tourism demand in 3Q22 which will lift its hotel occupancy and average room rates.
• Maintain OVERWEIGHT and we look forward to China’s eventual border reopening. While we deem that Singapore’s swift international patronage recovery to pre-pandemic levels coupled with resilient local visitations will continue to drive earnings recovery, we retain our view that China’s eventual border reopening remains as a strong rerating catalyst for the gaming industry. To recap, Chinese visitors made up 19-20% of Singapore’s pre-pandemic tourist arrivals in 2018-19. Moving forward, we expect China to ease travel restrictions from 4Q21-1Q23 onwards, and its travel pent-up demand may allow both MBS
and RWS to potentially deliver above pre-pandemic 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 cash-flushed GENS (net cash accounts for 33% of market cap) to engage in significantly better capital management moving forward and to offer an attractive prospective yield of 5.1-5.8% in 2023.