- Marina Bay Sands’ 1Q14 VIP volume plunged 29% YoY.
- We expect GENS’ 1Q14 VIP volume to also fall YoY.
- Maintain contrarian SELL with a lower TP of SGD1.24, still pegged to 10x FY14E EV/EBITDA.
Marina Bay Sands (MBS) reported a 10% YoY increase in 1Q14 EBITDA to USD435.2m, mainly due to a VIP win rate of 3.41% which was 90bps higher YoY. More ominously, VIP volume in USD terms plunged 29% YoY. Mass market GGR (tables and slots) did not help much either, easing 47bps YoY in USD terms. Management did not comment much on the Japanese casino liberalisation process.
What’s Our View
Assuming Resorts World Sentosa (RWS) commands a 51% VIP volume share (FY13 average), we can expect GENS to report 1Q14 VIP volume contraction of ~19% YoY to ~SGD17b. Furthermore, we note that MBS’s 1Q14 rebate rate of 1.38% of VIP volume was its all-time high. RWS might have offered higher rebate rates to its VIPs as well to preempt VIP volume share loss. If so, it would lead to lower EBITDA margins.
If RWS commands a 45% mass market GGR share (FY13 average), we estimate its 1Q14 mass market GGR would fall 7% YoY to ~SGD430m. That said, this would be a welcome change from the 4Q13 mass market GGR of ~SGD370m, which we estimate was an all-time low due to low mass market win rates. Assuming normalised VIP win rate of 2.85%, we expect GENS to report 1Q14 EBITDA of ~SGD300m or below expectations. We trim our FY14E/15E/16E earnings by 5%/3%/2% to account for higher depreciation for now. We also trim our TP from SGD1.26 to SGD1.24, still pegged to 10x FY14E EV/EBITDA. Maintain SELL.
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