Genting Singapore’s recent decision to shift its expansion plans for Resorts World Sentosa (RWS) towards a more premium offering has been characterized as Return on Invested Capital (ROIC)-positive, despite a notable increase in development costs. The move, announced on Friday, involves a significant uptick in the total investment for RWS 2.0 from the initially planned SG$4.5 billion to SG$6.8 billion.
Increased Investment: Premium Focus and Rising Costs
The article explores the reasons behind Genting Singapore’s decision to increase its investment in RWS 2.0, attributing the cost escalation to both higher commodity and labor costs over the years. Notably, the shift towards a more premium offering, with a reduced number of high-end suites compared to the original design, is identified as a significant contributing factor. The discussion emphasizes how the pursuit of a premium product aligns with recent successes seen at Marina Bay Sands, reinforcing the positive potential for Return on Invested Capital.
ROIC-Positive Outlook
The article delves into the Nomura analysts’ perspective on the ROIC implications of Genting Singapore’s strategic pivot. The Nomura note highlights that while the increased costs are a consequence of the shift to premium offerings, the Return on Invested Capital from such a product is expected to be higher, drawing parallels with the success observed at Marina Bay Sands after the introduction of high-end suites.
Strong 3Q23 Results and VIP Market Share
The article discusses Genting Singapore’s third-quarter results, which surpassed market consensus, driven in part by enhanced marketing efforts in the VIP space. Nomura’s estimation of RWS achieving a 51% market share in VIP rolling chip for the quarter is explored, emphasizing the success of aggressive marketing strategies, bespoke commission programs, and events targeting high-end VIP customers from North Asia.
Market Dynamics and Concerns Dispelled
An analysis of market dynamics and recent concerns, including the impact of widening Singapore money-laundering asset seizures and a weakening China macro, is presented. Nomura’s positive outlook on Genting Singapore’s 3Q23 results is highlighted, suggesting that the market will react favorably and dispel concerns, reaffirming the growth narrative in both gaming and non-gaming revenues.
Anticipated Market Reaction
The article concludes by anticipating a positive market reaction when trading resumes, emphasizing the significance of Genting Singapore’s strong 3Q23 results in dispelling investor concerns. It reiterates the analysts’ view that the growth story, driven by gradual visitation improvement, remains intact despite recent challenges in the VIP market and broader macroeconomic trends.
Genting Singapore’s strategic pivot towards a more premium offering at Resorts World Sentosa comes with increased costs but holds the promise of enhanced Return on Invested Capital. As Genting Singapore navigates market dynamics and aligns its focus on premium offerings, the potential for sustained growth and profitability remains a key narrative in the company’s evolving strategy.