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Fitch: Regulatory, Competition Risk Weigh on Singapore Casinos

(The following statement was released by the rating agency) NEW YORK/SINGAPORE, October 30 (Fitch) Singapore's casinos will face increased regional competition, and potential changes to gaming policies that weigh on their medium-term growth and profitability outlook, says Fitch Ratings. However, the agency maintains that the sharp contraction in revenue from VIP clients in the second-half of 2014 is temporary, and that recovery in this segment should provide some respite for Singapore's two integrated resort casinos - Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) in 2015. Growth in Singapore gaming revenue has stalled, and is likely to contract slightly in 2014 with macroeconomic and political factors in China being the principal cause. A slowdown in China's economic growth, recent corruption crackdown, and credit tightening have had a particularly strong impact on Singapore's casinos. The VIP business, which is mostly Chinese, accounts for roughly half of total gaming revenue at MBS and RWS. Fitch expects VIP numbers to improve in the latter part of 2015, and maintains that the tightening restrictions within China are temporary. However, the ability of Singapore's gaming industry to tap into a Chinese recovery and the broader growth will be challenged in the longer term, especially as it faces increased regional competition from new casinos in the Philippines, Macau and, potentially, Japan. The Philippines will have three large-scale casino resorts by the end of 2014, and several major new casino projects are under construction in Macau. Political momentum to legalise casinos is the strongest it has ever been in Japan, while Sri Lanka, Vietnam, Cambodia, Korea, Russia and Australia are all likely to open new casinos by 2020. Regulatory risks could also add to the challenges for Singapore casinos. Since granting its first gaming licences in 2006, Singapore has limited the casinos' ability to expand, by imposing a SGD100 entrance fee on Singapore citizens and permanent residents, and restricting their advertising and promotional scope locally. Political momentum is unlikely to shift towards greater liberalisation, at least in the short term, with recent parliamentary debates focusing on gaming policy. By law, Singapore's accommodating gaming tax is locked in at least until 2022; however, the tax rate could be revisited as the government considers granting additional licences when the duopoly period ends in 2017. The government has been tight-lipped on the subject, but recent political discussions suggest that it is unlikely that more gaming licences would be granted. However, it remains a potential risk for Singapore's existing casino operators, and the market remains very attractive to new entrants despite the potential for more regional competition. Contacts: Michael Paladino, CFA Senior Director Corporate Finance +1 (212) 908 9113 Fitch Ratings 33 Whitehall Street New York, NY 10004 Justin Patrie, CFA Senior Director +65 6796 7232 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com; Sandro Scenga, New York, Tel: +1 212-908-0278, Email: sandro.scenga@fitchratings.com; Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com; Wai-Lun Wan, Hong Kong, Tel: +852 2263 9935, Email: wailun.wan@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. Applicable Criteria and Related Research: Genting Berhad / Genting Singapore PLC http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744196 Eye in the Sky Series: Singapore (Gaming Jurisdiction Surveillance Monitor) http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718034 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.