MBS expansion has greater ROI potential: Bernstein

MBS expansion has greater ROI potential: Bernstein

The expansion project of Marina Bay Sands (MBS) in Singapore is likely to see an edge in terms of return on investment (ROI) potential, compared to that of market rival Resorts World Sentosa, suggested brokerage Sanford C. Bernstein in a Monday note. The Marina Bay Sands complex (pictured) is operated by a unit of U.S.-based casino operator Las Vegas Sands; and the Resorts World Sentosa scheme is run by Genting Singapore Ltd.

The expansion of both casino resort properties in Singapore had been outlined in April 2019. It had emerged at the time that the Singapore government would permit the city’s casino duopoly to be extended until 2030, while the two companies would invest an aggregate of SGD9 billion (US$6.65-billion) in expanding their respective facilities, inclusive of land costs.

“Genting’s Singapore expansion sees SGD4.5 billion in capex in 2020 – 2024 and we do not expect an ROI of 10 percent on this investment, which is largely geared towards more room product and entertainment expansion,” said Sanford Bernstein’s analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.

Genting Singapore’s expansion scheme for Resorts World Sentosa includes the addition of two new hotels with about 1,100 rooms that represent an approximately 70 percent increase in room count at the entertainment complex; 800 more slot machines and at least an additional 500-square-metre (5,382 sq feet) of gaming space. The plans envisage also the expansion of the Universal Studios Singapore Theme Park and the transformation of the Marine Life Aquarium into an “Oceanarium”.

“The development [of Resorts World Sentosa] was planned to occur in phases from 2021 through 2026, but development and opening timeline could be delayed as a result of the ongoing Covid-19 and if subsequent recovery takes place slower than expected,” wrote the brokerage’s team.

“Gaming remains the bread and butter of these large-scale integrated resorts. While non-gaming development such as theme park and aquarium expansion help boost visitation and drive traffic to Resorts World Sentosa property, they may do little to help drive gaming revenues,” the analysts added.

The management of Genting Singapore said in recent comments that there was likely to be “slippage” in the timetable for building the expansion to the Resorts World Sentosa amid the Covid-19 crisis.

The key expansion elements of Marina Bay Sands – featuring additional luxury suites and more gaming space – could help the property with greater ROI potential, which is estimated at “mid-teens percentage”, stated the Sanford Bernstein analysts.

The new development at Marina Bay Sands is occurring in stages from end of 2019 through end of 2023.

“Marina Bay Sands is adding 1,000 slot machines (at least about 500 have already been put in place) and 2,000 square metre gaming space,” the analysts wrote.

“The new high end hotel room inventory will drive international premium mass and VIP business to a much greater extent than what can be done at Resorts World Sentosa,” they added. They were referring to the addition of about 1,000 luxury suites at an under-construction fourth hotel tower, and the development of a sky casino to the Marina Bay Sands’ Tower 1.

The expansion to Marina Bay Sands also include the renovation of about 400 suites at the complex’s Towers 1 and 2, and the addition of a 15,000-seat arena.

The brokerage estimated that the Singaporean gaming market could see a recovery to 2019 levels of gross gaming revenue (GGR) only by 2023. It said it expected the city-state’s GGR to decline by 59 percent this year, with possible room for downside “depending on pace of travel reopening and reduction in social distancing limitations”.

Casinos in Singapore are due to reopen to select customers from Wednesday (July 1), after being closed since April 7 as a pandemic countermeasure.

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