Singapore casino earnings outlook stable: Fitch

Lack of competition outweighs slower economy, fewer tourists

The Marina Bay Sands casino has the lion's share of the market here because of its central location and strong branding, reported Fitch Ratings.
The Marina Bay Sands casino has the lion's share of the market here because of its central location and strong branding, reported Fitch Ratings.PHOTO: LIM YAOHUI FOR THE STRAITS TIMES

The outlook for the local casino gaming sector is stable despite slowing economic growth and fewer tourist arrivals, said rating agency Fitch Ratings yesterday.

Fitch expects gross gaming revenue at the two casinos - Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) - to stagnate next year after falling about 10 per cent to US$4.8 billion (S$6.7 billion) this year.

"The anti-corruption crackdown in China, weaker Indonesian rupiah and softer regional economic growth have caused earnings to plateau," its report said.

MBS has the lion's share of the market, "driven by its central location, connection to the mass transit rail system, and a brand synonymous with premium casinos".

Fitch said MBS, which is near the financial district, increased its market share to 62 per cent in the third quarter this year, from 49 per cent in the first quarter of last year.

The "duopolistic market" looks set to continue, as Fitch does not expect the Government to grant licences to set up new casinos, despite the imminent expiry of the exclusivity period for the two already here .

This is due to a potential increase in problem gaming among the local population, and the muted outlook for inbound tourism, the report said.

Singapore put in place a 10-year moratorium on new casino licences in 2007, after it gave the go-ahead for MBS and RWS.

Mr Lee Yi Shyan, then Senior Minister of State for Trade and Industry, told Parliament in May that the Government had "no plans" to offer additional casino licences when the moratorium on such licences expires in 2017.

Fitch also has a stable outlook for the Malaysia gaming sector as it is underpinned by the "market's domestic and mass-market focus, which provides defensive qualities".

It said Genting Malaysia, MBS and Genting Singapore, which operates RWS, are established companies that consistently generate "robust operating cash flows, and maintain a net cash position and moderate leverage".

This is amid slowing growth, weakening local currencies against the United States dollar and rising competition from casinos in the Philippines and South Korea.

However, Fitch said it would revise the outlooks for the sector if a sharp cyclical downturn squeezes the earnings before interest, taxes, depreciation and amortisation margins and raises financial leverage.

A version of this article appeared in the print edition of The Straits Times on December 08, 2015, with the headline 'S'pore casino earnings outlook stable: Fitch'. Subscribe