Is Genting losing to Marina Bay Sands?

The group has been losing gaming marketshare to Marina Bay Sands, especially in its VIP gaming business.

DMG says its VIP rolling chips volume stayed relatively flat compared to MBS’ whopping 37% jump in 3Q11.

Here’s more from DMG:

We believe that RWS’ more cautious VIP credit policy amid the global uncertainties and its lower number of available rooms at 1,300 vs MBS’ 2,600 may have led to MBS gaining market share, which stood at 45%:55% in favor of MBS. On an adjusted theoretical hold rate comparison, RWS’ daily net gaming revenue of S$6.7m vs MBS’s S$9.2m implies an annualized gaming market worth S$5.8bn in Singapore.

But ramping up luxury hotel capacity in 4Q11 should mitigate the downside. The group is expected to open up 200 more luxury hotel rooms at the Equarius Hotel and 20 high-end beach villas from end-4Q2011 onwards which will largely cater to its premium high rollers. The importance of the additional VIP room capacity in driving incremental growth in VIP gaming volume must not be under-estimated as nearly 80% of the group’s VIP customers comprises foreigners.

Hence, enhanced room offerings at the resort itself is an important factor, one which the Western Zone due for completion by mid-2012 aims to address. Of the group’s current capacity of 1,300 rooms, only 110 in Crockfords Tower cater to premium VIP customers. As such, merely adding 200 more luxury rooms will more than double the group’s premium room capacity.

The stock, at a FY12 EV/EBITDA of 10.1x, is trading at a 17% to 21% discount to its Macau gaming peers, which has more than priced in the relatively slower gaming growth in Singapore relative to Macau. The eventual legalization of junkets in Singapore, on which management is optimistic on materializing soon, as well as new VIP room capacity coming on stream in 4Q11, may be a key re-rating catalyst. Maintain BUY and fair value at S$2.14.