Divi-paying Genting in Japan IR mix

Divi-paying Genting in Japan IR mix

Monday, November 7, 2016 Posted by Andy McCarron
Signs of life in Singapore but great interest in Osaka

The Singapore duopoly of Genting’s Resorts World Sentosa and Las Vegas Sands’ Marina Bay Sands both enjoyed quarter-on-quarter improvements in gross gaming revenues (GGR), suggesting they are sharing the recovery being witnessed in Macau, but both companies are eyeing the possibility of the Japanese parliament passing a bill to legalise casinos this week.

The third-quarter results from Genting Singapore showed an 8% sequential improvement to US$412m, up from $360m in the second quarter. Las Vegas Sand, meanwhile, said in its third-quarter statement last week that Marina Bay Sands GGR had risen from $644m to $675m over the period.

The results were positive enough for Genting Singapore to pay an interim dividend but analysts at Union Gaming suggested it was unlikely this represented a change of long-term policy despite the company having $4.8bn of cash on the balance sheet.

“The company remains intensely focused on Japan and thinks a bill could be passed this month,” wrote analyst Grant Govertsen. “Should this happen they want to preserve capital for a potential development.”

The Japanese lower house Diet will be debating a bill that would allow for the passing of an integrated report (IR) promotion bill this week. That bill will be heard either this Wednesday or Friday.

Speaking last week on the analyst conference call, LVS chairman and chief executive Sheldon Adelson expressed confidence that the bill would pass and that the city of Osaka would be given the right to build a casino.

Both Genting Singapore and LVS would also face competition from MGM to gain the right to build and operate a property in Japan. MGM pledged last week that it would spend $10bn if it won the race.

Union Gaming said last week that the odds of passage had “never bene as high as they are today”. However, they warned that even if any project got the go-ahead, it would be at least two years before there were “any shovels in the ground”.

They added that should the bill fail to pass the likelihood was that Genting Singapore would pay off the $1.8bn in perpetual loans it secured several years ago in anticipation of the last time the Japanese politicians contemplated passing a casino bill.

Analysts at Morgan Stanley suggested Genting Singapore will see “meaningful” EBITDA growth going into next year due to declining VIP impairments. However, Union Gaming was more tentative, noting that the gaming metrics were still trending down and that the management’s tone during the call with analysts “remains very cautious” with respects to near-term prospects, namely ongoing currency headwinds, the continued impact of the anti-corruption drive in China and the company’s general conservatism with regard to the VIP business.

Totally Gaming says: Singapore has suffered as much as Macau from the downturn in Asian gaming caused largely by the anti-corruption drive on the part of the Chinese authorities, thus impacting junket play across the region. But fortunes can change quickly in gaming, and Japan offers just such an opportunity. All eyes now turn to the Japanese Diet this week.

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