Marina Bay Sands, Singapore

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Information about Marina Bay Sands, Singapore
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Published on February 19, 2009

Author: rjpetrescu

Source: slideshare.net

Description

A discussion of the Marina Bay Sands project in Singapore

Everything on the Red Dot! Marina Bay Sands Integrated Resort Singapore Jon McCallum Sing Ai Lee Julian Petrescu Eemei Tang

Introduction What is the IR Who are the players Las Vegas Sands Corp (LVS) LVS’s entry decisions Macro lens Industry lens Firm lens Risks Assessment Conclusion

What is the IR

Who are the players

Las Vegas Sands Corp (LVS)

LVS’s entry decisions

Macro lens

Industry lens

Firm lens

Risks

Assessment

Conclusion

An Integrated Resort – The Marina Bay Sands (Singapore) One of two casino concessions awarded by the Singapore government in May 2006 Targeted to open certain features in December 2009 15,000 sq meters of casino space In addition to the casino, the integrated resort will include, among other amenities, a hotel, a retail complex, a convention center and meeting room complex, theaters, restaurants and an art/science museum.

One of two casino concessions awarded by the Singapore government in May 2006

Targeted to open certain features in December 2009

15,000 sq meters of casino space

In addition to the casino, the integrated resort will include, among other amenities, a hotel, a retail complex, a convention center and meeting room complex, theaters, restaurants and an art/science museum.

 

Players in Singapore Two casino concepts with very different focus: Las Vegas Sands in Marina Bay IR business, high rollers, MICE “ strengthen Singapore's position as a leading Meetings, Incentives, Conventions & Exhibitions (MICE) destination and possess unique design elements that will provide a memorable image for Marina Bay” Genting International with Star Cruises, Universal Studios on Sentosa IR “ large-scale, family resort with a host of world-class family leisure attractions”

Two casino concepts with very different focus:

Las Vegas Sands in Marina Bay IR

business, high rollers, MICE

“ strengthen Singapore's position as a leading Meetings, Incentives, Conventions & Exhibitions (MICE) destination and possess unique design elements that will provide a memorable image for Marina Bay”

Genting International with Star Cruises, Universal Studios on Sentosa IR

“ large-scale, family resort with a host of world-class family leisure attractions”

Macro Lens *Source: Singapore Department of Statistics (2007) +Stable +One of the least corrupt countries in the world +Legal system is based on the English common law -Govt sought opinion of people but overruled consensus on IR Politics +GDP growth: 7.7%* +GDP per capita: US$35,163* +Annual Inflation rate: 2.1%* +Visitor arrivals(‘000): 10,284* -Revised projections: economy will shrink by 2-5% in 2009 Economy Government-linked corporations SMEs – regional ethnic Chinese +MNC-friendly +Govt encourages foreign investments for creation of jobs and stimulation of economy +Gaming tax rate = 17.3% (vs 39% in Macao) Business System Population: 4.6M* +Unemployment rate: 3.1%* +Low crime rate: 709 per 100K +Travel time from Major Airport: 25 minutes by car +Bayfront MRT station (2013) -Terrorism - Outbreak of diseases i.e. SARS Other

Government-linked corporations

SMEs – regional ethnic Chinese

+MNC-friendly

+Govt encourages foreign investments for creation of jobs and stimulation of economy

+Gaming tax rate = 17.3% (vs 39% in Macao)

Population: 4.6M*

+Unemployment rate: 3.1%*

+Low crime rate: 709 per 100K

+Travel time from Major Airport: 25 minutes by car

+Bayfront MRT station (2013)

-Terrorism

- Outbreak of diseases i.e. SARS

Industry Lens (1) Market size - Local: low + Regional: high Indonesia, Malaysia, Thailand, India International: possibly high 1 mil. + Chinese arrivals to Singapore (2006) Holiday 47%, Business 22%, Visit 18%, MICE 2% Market growth WW ~US$300 bil. gaming revenue (2004) Regional + US$ 26 bil. (Indo, Thailand, India, Malaysia) + Macau’s is US$22 bil. + Macau has 27 mil. visitor arrivals Singapore + 54% Singaporeans gambled in the last year; 1 mil. visited Genting

- Local: low

+ Regional: high

Indonesia, Malaysia, Thailand, India

International: possibly high

1 mil. + Chinese arrivals to Singapore (2006)

Holiday 47%, Business 22%, Visit 18%, MICE 2%

WW

~US$300 bil. gaming revenue (2004)

Regional

+ US$ 26 bil. (Indo, Thailand, India, Malaysia)

+ Macau’s is US$22 bil.

+ Macau has 27 mil. visitor arrivals

Singapore

+ 54% Singaporeans gambled in the last year; 1 mil. visited Genting

Industry Lens (2) -Timing -Building on track, other corporate developments suspended +Macau Sands had much fewer losses than Las Vegas: resilience of the local gambling market? - Lack of requisite skills (e.g. croupier) Low service orientation in Singapore Other Casinos in Macau -Sands’ own: Venetian Macau - cannibalize our own? Macau has wider reach (3 bil. people within 5 hr. flight vs. 2 bil. for SG) Visa restrictions for Chinese? Casino de Genting Going upmarket, but might create demand for Sands (?) Local gambling -Very different market Competition

-Timing

-Building on track, other corporate developments suspended

+Macau Sands had much fewer losses than Las Vegas: resilience of the

local gambling market?

- Lack of requisite skills (e.g. croupier)

Low service orientation in Singapore

Casinos in Macau

-Sands’ own: Venetian Macau - cannibalize our own?

Macau has wider reach (3 bil. people within 5 hr. flight vs. 2 bil. for SG)

Visa restrictions for Chinese?

Casino de Genting

Going upmarket, but might create demand for Sands (?)

Local gambling

-Very different market

Las Vegas Sands Corp. Las Vegas The Venetian (92.2% occ, LTM EBITDA: $314M) The Palazzo (94.5% occ, L9M EBITDA: $96M) The Sands Expo and Convention Center The Congress Center Bethlehem, Pennsylvania Sands Bethworks (IR under development) Macao Sands Macao (98.8% occupancy, LTM EBITDA: $239M) The Venetian Macao (92.1% occupancy, LTM EBITDA: $504M) Cotai StripTM (IR under development; to open in 2009) Singapore Marina Bay Sands (IR under development) (2010E: 90% occupancy, Implied EBITDA of $504M + $436M* = $940M) *MBS implied EBIDTA = Venetian Macao EBITA + Differential tax treatment in Macao (39%) and Singapore (17.3%) Established player in the U.S. and Macao casino industry, but can similar level of success be achieved in Singapore? ADR = Average Daily Rate per rented room LTM = Last Twelve Months; L9M = Last 9 Months 3Q 2008 figures

Las Vegas

The Venetian (92.2% occ, LTM EBITDA: $314M)

The Palazzo (94.5% occ, L9M EBITDA: $96M)

The Sands Expo and Convention Center

The Congress Center

Bethlehem, Pennsylvania

Sands Bethworks (IR under development)

Macao

Sands Macao (98.8% occupancy, LTM EBITDA: $239M)

The Venetian Macao (92.1% occupancy, LTM EBITDA: $504M)

Cotai StripTM (IR under development; to open in 2009)

Singapore

Marina Bay Sands (IR under development)

(2010E: 90% occupancy, Implied EBITDA of $504M + $436M* = $940M)

*MBS implied EBIDTA = Venetian Macao EBITA + Differential tax treatment in Macao (39%) and Singapore (17.3%)

Firm Lens – The Good Stuff Experts 30-yr casino licence (10-yr exclusive) 60-yr land lease MRT station at IR Resources Brand Goodwill with Govt IT Equipment Assets Mgmt & development expertise for MICE IR cum casinos in US Pioneer of casino & conventions concept Experience in training casino staff “ Las Vegas”-style gaming Competencies Govt support Implicit govt guarantee in bad economic climate Other

Experts

30-yr casino licence (10-yr exclusive)

60-yr land lease

MRT station at IR

Brand

Goodwill with Govt

IT

Equipment

Mgmt & development expertise for MICE IR cum casinos in US

Pioneer of casino & conventions concept

Experience in training casino staff

“ Las Vegas”-style gaming

Govt support

Implicit govt guarantee in bad economic climate

Overall Risks for Firm Macro-economy Previously high construction costs greatly increased development costs Low level of indigenous demand Small open economy sensitive to external shocks Political risks Casino license may be terminated prior to expiration “in order to serve the best interests of the public” (“Fair compensation” to be paid) Required to regulate casino access by Singaporeans and non-Singaporeans; and those relating to social controls and maintaining law and order Popular opinion might become more strongly negative once “vices” emerge Business/ Industry risks Initially required investment of at least SGD3.85B. Already exceeded. Projected total cost SGD7.15B or USD 4.5B. Key constraint: gaming area =< 15,000m 2 Pay “externality” fee renewable 3-yearly More new casinos coming to Singapore Firm-specific risk High leverage >> $1.52B mkt cap vs $8.8B debt (83%)

Macro-economy

Previously high construction costs greatly increased development costs

Low level of indigenous demand

Small open economy sensitive to external shocks

Political risks

Casino license may be terminated prior to expiration “in order to serve the best interests of the public” (“Fair compensation” to be paid)

Required to regulate casino access by Singaporeans and non-Singaporeans; and those relating to social controls and maintaining law and order

Popular opinion might become more strongly negative once “vices” emerge

Business/ Industry risks

Initially required investment of at least SGD3.85B. Already exceeded. Projected total cost SGD7.15B or USD 4.5B.

Key constraint: gaming area =< 15,000m 2

Pay “externality” fee renewable 3-yearly

More new casinos coming to Singapore

Firm-specific risk

High leverage >> $1.52B mkt cap vs $8.8B debt (83%)

Assessment Is it going to work? Major Issues Can be overcome? Is the international potential realisable? Probably, though still significant issue Cannibalisation of Macao No Skilled labour Will require large investment, but Singapore government committed License dilution No, this will be up to the government

Conclusion Did Sands make a good bet? Yes, provided it survives the current crisis The Singapore government is committed to make this project work What is the key to success? Attracting the customers, training the staff and getting through the short term

Did Sands make a good bet?

Yes, provided it survives the current crisis

The Singapore government is committed to make this project work

What is the key to success?

Attracting the customers, training the staff and getting through the short term

Latest developments “ With its Macao and Singapore projects lagging badly, Las Vegas Sands has tasked a new executive team for its Asian portfolio” ( www.lasvegasadvisor.com , Feb 2, 2009) Nov 5 SEC filing: Sands's earnings were &quot;insufficient to cover fixed charges&quot; by $80.1 million.  Could trigger defaults on its $8.8 billion in long-term loans  Could jeopardize Las Vegas Sands' ability to continue &quot;as a going concern&quot; The company had US$600+ mil. in FCF annually 3 years ago ( Time Magazine , Nov 7, 2008) “ Operating income fell 81% to US$14.6 million in Las Vegas, 39% to US$38.7 million at Sands Macao and 13% to US$61.3 million at the Venetian Macao.” ( Channel News Asia , Feb 12, 2009)  much less significant drop at the Asian properties, despite the crisis &quot;There is no doubt in my mind the Singapore government will come in to ensure the project is completed. The government will not let it fail. &quot; (Merrill Lynch, in Time Magazine )

“ With its Macao and Singapore projects lagging badly, Las Vegas Sands

has tasked a new executive team for its Asian portfolio” ( www.lasvegasadvisor.com , Feb 2, 2009)

Nov 5 SEC filing: Sands's earnings were &quot;insufficient to cover fixed charges&quot; by $80.1 million.

 Could trigger defaults on its $8.8 billion in long-term loans

 Could jeopardize Las Vegas Sands' ability to continue &quot;as a going concern&quot;

The company had US$600+ mil. in FCF annually 3 years ago ( Time Magazine , Nov 7, 2008)

“ Operating income fell 81% to US$14.6 million in Las Vegas,

39% to US$38.7 million at Sands Macao and 13% to US$61.3 million at the Venetian Macao.”

( Channel News Asia , Feb 12, 2009)

 much less significant drop at the Asian properties, despite the crisis

The End

Supplementary Slides

Risks Change in government policy Change in laws Change in regulations and or interpretation Changes in China (liberal travel and currency movements) Untested regulations/laws on gambling in Singapore Gov agency review and approval Opening of new Casinos? Licenses in HK, Japan, Sing, Taiwan, Thailand possible Ability to attract, retain, train, manage and motivate employees Sensitive to “discretionary consumer spending” (hotels, conventions and trade shows will all be hit by a down turn) Willingness of customer to travel Infection diseases (SARS, Avian Flu) Terrorist action License Minimum investment required (cash and time) Annual fee Restrictions on gaming area and machines)

Change in government policy

Change in laws

Change in regulations and or interpretation

Changes in China (liberal travel and currency movements)

Untested regulations/laws on gambling in Singapore

Gov agency review and approval

Opening of new Casinos? Licenses in HK, Japan, Sing, Taiwan, Thailand possible

Ability to attract, retain, train, manage and motivate employees

Sensitive to “discretionary consumer spending” (hotels, conventions and trade shows will all be hit by a down turn)

Willingness of customer to travel

Infection diseases (SARS, Avian Flu)

Terrorist action

License

Minimum investment required (cash and time)

Annual fee

Restrictions on gaming area and machines)

Political Promises to Singaporeans Two Resort Complexes Integrated resorts at Marina Bayfront and Sentosa Casino to fill less than 5% of total floor area at each complex. Marina Bayfront: Business and convention facility on a 12.2-ha site Sentosa: Family-friendly resort on 47-ha site Total investments of around $5 billion 35,000 new jobs $1.5b annual boost for GDP Contracts to be awarded by end of the year and resorts operational around 2009 Gambling Controls Casino entrance fee for Singapore citizens and PRs: $100 a day and $2,000 a year. Money collected to go to Singapore Totalisator Board for charitable causes Spouses and family members can ask that people with gambling problem be denied entry Bankrupts, people on public assistance and those with poor credit records will be excluded Locals cannot use credit cards post-dated cheques or get credit from casinos No advertising by casinos in local media Home Affairs Ministry to set up Casino Regulatory Authority Ministry of Community Development, Youth and Sports to set up National Council on Gambling Public education programme on danger of gambling to begin in July National wellness centre to be up to help compulsive gamblers

Two Resort Complexes

Integrated resorts at Marina Bayfront and Sentosa

Casino to fill less than 5% of total floor area at each complex.

Marina Bayfront: Business and convention facility on a 12.2-ha site

Sentosa: Family-friendly resort on 47-ha site

Total investments of around $5 billion

35,000 new jobs

$1.5b annual boost for GDP

Contracts to be awarded by end of the year and resorts operational around 2009

Gambling Controls

Casino entrance fee for Singapore citizens and PRs: $100 a day and $2,000 a year. Money collected to go to Singapore Totalisator Board for charitable causes

Spouses and family members can ask that people with gambling problem be denied entry

Bankrupts, people on public assistance and those with poor credit records will be excluded

Locals cannot use credit cards post-dated cheques or get credit from casinos

No advertising by casinos in local media

Home Affairs Ministry to set up Casino Regulatory Authority

Ministry of Community Development, Youth and Sports to set up National Council on Gambling

Public education programme on danger of gambling to begin in July

National wellness centre to be up to help compulsive gamblers

Informal Interview with MTI Business model Sands: MICE; Genting: Family entertainment; no overlap Differentiated from Macau by MICE model: mainly business visitors Use Marina Bay Sands to showcase MICE/IR model to enter other Asian cities Key resources Very long land lease 10 year exclusive casino concession (together with Genting, the other concessionaire) Downsides Required to have high local worker content Skilled casino workers Ability or willingness to operate social restrictions for locals Key constraint: gaming area restricted as will be gaming revenue Viability Sands broke even in Macau in 9 mths Recent trouble due to several devt projects exceeding cost and weak revenue in Macau and the US No explicit promises of govt aid in Singapore Prognosis Very profitable in long term barring worldwide economic depression

Business model

Sands: MICE; Genting: Family entertainment; no overlap

Differentiated from Macau by MICE model: mainly business visitors

Use Marina Bay Sands to showcase MICE/IR model to enter other Asian cities

Key resources

Very long land lease

10 year exclusive casino concession (together with Genting, the other concessionaire)

Downsides

Required to have high local worker content

Skilled casino workers

Ability or willingness to operate social restrictions for locals

Key constraint: gaming area restricted as will be gaming revenue

Viability

Sands broke even in Macau in 9 mths

Recent trouble due to several devt projects exceeding cost and weak revenue in Macau and the US

No explicit promises of govt aid in Singapore

Prognosis

Very profitable in long term barring worldwide economic depression

References http://www.integratedresorts.com.sg/ Informal interview with Deputy Director (Tourism), Ministry of Trade & Industry LV Sand’s 10K and 10Q filings with SEC “ Singapore approves casino plan” BBC News Apr 18, 2005 “ Singapore collects record S$14.8b in tourism receipts last year “ Channelnewsasia.com, Feb 3, 2009 www.lasvegasadvisor.com , Feb 2, 2009 Singapore Department of Statistics “ All Bets Off for Las Vegas Sands' in Singapore?” Time Magazine, Nov 7, 2008 “ Las Vegas Sands swings to fourth-quarter loss” Channelnewsasia.com, Feb 12, 2009 “ A multibillionaire’s relentless quest for global influence.” New Yorker, Jun 30 2008 “ Chinese Officials Gamble, and Their Luck Runs Out” Nytimes, Jan 15 2009 Sands investor report for Dec 2008: http://phx.corporate-ir.net/phoenix.zhtml?c=185629&p=irol-presentations

http://www.integratedresorts.com.sg/

Informal interview with Deputy Director (Tourism), Ministry of Trade & Industry

LV Sand’s 10K and 10Q filings with SEC

“ Singapore approves casino plan” BBC News Apr 18, 2005

“ Singapore collects record S$14.8b in tourism receipts last year “ Channelnewsasia.com, Feb 3, 2009

www.lasvegasadvisor.com , Feb 2, 2009

Singapore Department of Statistics

“ All Bets Off for Las Vegas Sands' in Singapore?” Time Magazine, Nov 7, 2008

“ Las Vegas Sands swings to fourth-quarter loss” Channelnewsasia.com, Feb 12, 2009

“ A multibillionaire’s relentless quest for global influence.” New Yorker, Jun 30 2008

“ Chinese Officials Gamble, and Their Luck Runs Out” Nytimes, Jan 15 2009

Sands investor report for Dec 2008: http://phx.corporate-ir.net/phoenix.zhtml?c=185629&p=irol-presentations

 

 

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