The decline of the Asian junket industry could negatively impact Singapore’s integrated resorts with Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) set to face increased regional competition for its regular premium mass players.
According to a Tuesday note from Maybank IB Research highlighting increased headwinds for RWS operator Genting Singapore – including the suspension of the land vaccinated travel lane (VTL) between Singapore and Malaysia on 23 December – analyst Samuel Yin Shao Yang warned that Singapore’s most lucrative player base would now become an obvious target for regional competitors in Macau, the Philippines and Cambodia.
“We fear that the IRs in Macau, Philippines and Cambodia will target the premium mass gamblers that frequently gamble in Singapore,” Yin wrote.
“These IRs will have to fill the large gap left by the formerly junkets driven VIP market. As it is, the Macanese IRs are already duking it out to attract Chinese premium mass gamblers and will target Southeast Asian premium mass gamblers who frequent Singaporean IRs when borders reopen. We have heard the same from the Philippine and Cambodian IRs.”
Also working against Singapore’s IRs is an impending increase to the tax rate – from 15% to 18% for the mass market segment – which along with a GST hike will see margins compressed by 5 percentage points.
“The gaming tax and GST rate hikes will work against RWS (and MBS),” Yin said. “IRs in the Philippines and Cambodia which have a similar, if not lower, tax regime can offer higher rebate rates to Southeast Asian premium mass gamblers who frequent Singaporean IRs to attract them.
“IRs in Macau may not be able to do the same due to their much higher tax regime. Yet, we gather that they can offer superior accommodation. We gather that the most intense competition will come from Cambodia’s NagaWorld due to its low tax regime and familiarity to Southeast Asian, mainly Malaysian, premium mass gamblers. Even before the COVID-19 pandemic struck, Genting Singapore did mention that competition for premium mass gamblers from Cambodia, ostensibly NagaWorld, is intense.”
On a positive note, Singapore’s VIP market should remain largely untouched by China’s crackdown on cross-border gambling due to the state’s regular VIP players having substantial ties to Singapore and vastly different money channels than those that facilitated Macau’s junket industry.
As such, “we do not believe that the IRs in Macau, Philippines and Cambodia will target the VIPs that frequently gamble in Singapore successfully,” Yin said.
Nevertheless, Maybank has cut Genting Singapore’s earnings estimates by 72% in 2022 and 54% in 2023 due to the combined headwinds of increased competition and ongoing suspension of the land VTL with Malaysia.
“Essentially, we expect Genting Singapore earnings to remain uninspiring for another year, making it three years of pedestrian earnings,” he said.