Genting Singapore will lose big under stricter Casino Control Act

The government has proposed higher penalties and gambling deposits which will deter high-rolling VIP clients.

Here's more from Maybank Kim Eng

No respite from its unlucky streak. The Singapore Government has proposed three amendments to the Casino Control Act which we deem as likely to be detrimental to GENS’ VIP volumes if passed. These amendments are likely to offset any benefit that GENS stands to gain from the establishment of Singapore as a CNY hub.

A much stricter Casino Control Act is bad for business. Last Friday saw two Chinese banks getting full banking licenses to operate in Singapore of which one will clear CNY transactions. Experience from Hong Kong-Macau shows a positive flow through to Macau’s gross gaming revenue (GGR) when HK was established as a CNY trading hub back in Jun 2010. That said, the Singapore Government on the same day proposed three amendments to the Casino Control Act which we deem onerous (see overleaf). Public consultation will start today and end on 6 Aug. The government hopes to pass the amendments by YE.

Our concerns. (i) If financial penalties are raised to <10% of GGR from SGD1m currently, they will erode GENS’ profits; we estimate that the penalties may amount up to SGD370m or 25% of EBITDA (versus <1% in 2011). (ii) If IMA commissions, which the CRA may be empowered to cap, are set at below regional averages (Macau: 1.25%, Malaysia: 1.2-1.3%), IMAs will encourage their VIPs to gamble elsewhere. (iii) If VIPs have to draw down their SGD100k deposits first before the casinos can extend credit, VIPs will likely reduce length of play.