Are the chips down for Singapore's two casinos?

Are the chips down for Singapore's two casinos?

Recent earnings reports show that six years after opening to great fanfare, Singapore's casino duopoly is facing major challenges, including a slowdown in revenue and rising regional competition.

SINGAPORE: In 2010, Singapore’s two casino resorts opened to great fanfare and massive success, but the city-state’s gaming market is facing unprecedented challenges – from a corruption crackdown in China that is deterring high-rollers, to Asian rivals keen to grab a share of the lucrative market.

The Las Vegas Sands-run Marina Bay Sands (MBS) has seen revenue decline on a year-on-year basis for the last five quarters, while the losing streak has gone on for the last seven quarters for its cross-town rival, Genting Singapore’s Resorts World Sentosa (RWS).

"The reality is that the same factors impacting Macau – namely the anti-corruption drive and a slowing Chinese economy – are also impacting Singapore. In addition, currency weakness from Indonesia and Malaysia relative to the Singapore dollar is a contributing factor," said Mr Grant Govertsen, an analyst at Union Gaming Group.

China’s anti-corruption drive, initiated by President Xi Jinping, is entering its third year. The crackdown, which is targeted at officials who siphon money out of the mainland, has severely impacted Macau, the only place in China where casinos are legal.


Happier times: Genting group chairman Lim Kok Thay (centre, wearing suit) poses with his family after the opening of Singapore's first casino, the Resorts World Sentosa complex, on February 14, 2010. (Photo: AFP/Roslan Rahman)

Gross gaming revenue from VIPs – defined as gamblers who deposit more than S$100,000 with the casino – contracted by about 30 per cent year-on-year in 2015 across the two integrated resorts, said Ms Jessalynn Chen, an analyst at CIMB. And this fall out has been more pronounced at RWS because it has tended to be more reliant on Chinese VIP customers.

According to Ms Chen, RWS “has taken a hit from the anti-corruption drive both in terms of lower VIP rolling chip volume and also higher bad debt charges”. Meanwhile, MBS is supported by its strength in the mass gaming segment, which is predominantly made up of Southeast Asian customers. This is due to its central location and iconic building, which is a tourist attraction in itself, she said.

PROFITABILITY HIT BY RETREAT OF HIGH ROLLERS

In the most recent financial quarter, MBS reported an EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) margin of 45.5 per cent, versus RWS’ 33.1 per cent. A higher EBITDA margin – derived by dividing EBITDA by total revenue – reflects a more profitable operation.

Mr Gabriel Yap, executive chairman at investment firm GCP Global, blamed RWS’ relatively poorer performance on its bet on VIP gamblers. With the ongoing anti-corruption drive in China and a slowing Chinese economy, many high-stakes gamblers have stopped coming. And even among those who do come, the casino operators are struggling to get all of them to pay up.

“They have been focusing more on the high rollers, and that’s what got them into dire straits – the provisions (for bad debts). They have had to write off S$200 million worth of bad debts over the last 12 quarters,” he said.

These bad debts are partly the result of strict government regulations regarding junkets, which prohibit junket operators who bring in VIPs from lending them money to gamble. The casinos, as a result, have to bear the risk of lending to its own customers.


The EBITDA margin, a measure of profitability, for MBS and RWS. (Source: Company filings; Graphic: Linette Lim)

With the mass gaming segment generating higher EBITDA margins than the VIP segment, RWS had already begun to follow in the footsteps of its rival and shift its focus to the mass market. With the change in approach, Ms Chen expects margins for the Malaysian-controlled casino to improve from the second half of this year.

About 69 per cent of Singapore’s casino gaming revenue comes from the mass-market, versus only 46 per cent for Macau, according to a Bloomberg Intelligence report dated May 19. For RWS alone, this proportion has trended up to 59 per cent in the first quarter of 2016, from just 37 per cent in 2014.

Although the EBITDA margins for Singapore’s gaming duopoly are still higher than those in Las Vegas and Macau casinos, MBS and RWS are facing increasing competition from regional upstarts.

Since the Government legalised casino gambling 10 years ago and pushed through a plan to build the two integrated resorts, the authorities in neighbouring countries – South Korea, Vietnam, Cambodia, and the Philippines – have relaxed gambling regimes to allow similar large-scale integrated resorts to be built.

Visitors trying out gambling machines during a trade exhibition in Manila, Philippines. (File photo: AFP/Romeo Gacad)

Visitors trying out gambling machines during a trade exhibition in Manila, Philippines. (AFP/File - Romeo Gacad)

DID THE GAMBLE PAY OFF?

But even as competition intensifies against a backdrop of challenging conditions, the casinos in Singapore are seen to have been a success.

“The integrated resorts were never intended to make Singapore into a casino destination; their strategic purpose was to complement Singapore’s total tourism profile,” Mr Jonathan Galaviz, a partner at Global Market Advisors told Channel NewsAsia.

“Therefore, casino revenues should not be the sole litmus test for whether the integrated resorts are losing their luster.”

On the part of the two casino operators, the integrated resorts appear to have been a gamble that has paid off.

“If you add up the historical EBITDA numbers from 2010 to 2015 – at more than S$1 billion a year – both entities would have covered (the initial investment cost),” said Ms Chen. Including land cost, the initial investment cost came up to about S$7.7 billion for MBS, and S$6.6 billion for RWS.

As for the Singapore Government, it was revealed in a parliamentary exchange last year that the two integrated resorts have contributed between 1.5 and 2 per cent of Singapore’s GDP, and created more than 20,000 jobs.

These numbers will be of interest to regional competitors – including Japan, which is still sitting on a bill to legalise casinos – that are keen to demonstrate to their electorate that the economic benefits of gaming outweigh the potential downsides, like addiction and organised crime.

REVERSING THE DECLINE

Currently, gaming accounts for three-quarters of revenue for both MBS and RWS.

Both have been working to offset declining gaming revenue with income from non-gaming sources – including earnings from their hotel, retail, and convention operations.

But Mr Yap says there are limits to this strategy, as the growing receipts from food and beverage, and retail are still "not enough to offset the more lucrative gaming segment.”


Luxury retail, such as this Braun Buffel flagship boutique, help contribute to non-gaming revenue for Marina Bay Sands. Rival Resorts World Sentosa taps non-gaming revenue with attractions like the Universal Studios Singapore theme park. (Photo: Tang See Kit)

Others were slightly more upbeat, expecting Lady Luck to start smiling again soon for the casinos.

"Singapore remains an attractive gaming market, especially in the mass segment. Visitor arrivals to Singapore are also encouraging, growing 13.8 per cent year-on-year in the first quarter of this year," said Ms Chen.

"While the quality of visitors has fallen in terms of average spend and length of stay, the volume growth should still have a positive impact on the mass gaming business."

Govertsen expects to see some reversal in fortunes as the Chinese economy recovers over the coming quarters.

"Eventually we should see EBITDA margins begin to approach 50 per cent again. The reality is that Singapore is still one of the biggest gaming markets in the world, and in that sense is very viable."

Come next year, the exclusivity period for MBS and RWS will expire. But the Government – which this year renewed the casino licenses for both integrated resorts for another three years – has said that it has no plans to offer additional casino licenses.

While this means the duopolistic arrangement remains intact, analysts say it does not mean that it will be easy for the casino operators to keep their business growing.

“In the context of regional competition, there’s not a lot to be done strategically unless the Government (namely, the Casino Regulatory Authority) were to relax regulations to make it easier for the integrated resorts to do business,” said Mr Govertsen.

Analysts say that some measures that could help MBS and RWS quickly grow revenues would be to approve junket operators that source, and extend credit to, VIP players, or to raise hotel room capacity – but these are measures for which approval may be elusive, as the Government seeks to balance public interest considerations.

“The casinos have reaped a lot of returns since they started," said Yap. "But going forward – another five more years – (the market) won’t be as attractive as the last five, six years have been.”

“But then again, going forward, they won’t need to make so much, because the initial investment has been covered, and there’s no new capital expenditures to be made.”

Source: CNA/ll

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China orphan who broke our viewers’ hearts finds a home, 4,500km away in Singapore

Eight-year-old Keyuan is spending his first Chinese New Year in Singapore with his new parents - who fell in love with him after watching a Channel NewsAsia documentary on China’s unwanted children with disabilities.

07:18
Keyuan, the orphan boy from China without ears, stole the hearts of our viewers last year. But, "what if everyone thought that someone was going to do something - and he just ended up waiting and waiting... and nobody came?" This couple in Singapore weren't about to let that happen.

BEIJING, China: All the boy with no ears wanted was a family of his own. Airplanes were his favourite thing in all the world to draw – “my mum and dad will come and take me away on a plane,” he’d say, having watched yearningly as all the other children he’d grown up with left with new mummies and daddies.

But, as each year went by and he grew older, and it was always some other orphan’s turn to leave the foster care home but never his own, Wu Keyuan’s chances of being adopted grew dimmer.

Then, on July 30 last year – his eighth birthday – a couple from Singapore showed up at Alenah’s Home in Beijing.

They were there for one very specific child.

Mr Yap Vong Hin, 60, and Dr Lim Poh Lian, 52, hadn’t been looking to adopt again. Already with three children in their late teens – one of whom was adopted from China 16 years ago – they were looking forward to becoming empty-nesters.

But one day in March 2017, they heard about an episode on Chinese orphans on Channel NewsAsia’s investigative programme Get Real, and tuned in. The documentary explored the harsh realities for children born with disabilities, who often ended up abandoned by parents who cannot afford to keep them - China has little social security for the disabled. (Watch the episode here.)

In particular, one sparkly little boy with a band around his missing ears – he’d been born without them – tugged at their hearts. Thousands who watched his story on CNA Insider also fell in love instantly.


Given up when he was just a few days old, Keyuan was seven at the time of filming and already considered too old by a number of prospective parents, who preferred a child that was younger and female. In China, children become ineligible for adoption once they turn 14.

It was Keyuan’s poignant quote that did it for the Yaps. “I must be patient,” he said, the optimism shining in his eyes. “We can’t rush it. If we all rush for it, we’ll end up fighting!”

Said Dr Lim: “At the end of the documentary, I was in tears.

I remember thinking: What if everyone thought that someone was going to do something, and nobody did anything, and he just ended up waiting and waiting - and nobody came?

“The human heart can only take so much grief... so we thought - we can’t do everything but we can do this one thing.”

So the couple, who are Singapore permanent residents and United States citizens, flew up to Beijing to meet Keyuan and got the process going. And on Jan 29, 2018, he was officially adopted into the Yap family – with whom he is spending his very first Chinese New Year in Singapore, in a real home to call his own.


For Get Real executive producer Sharon Hun, the aim of the series has always been to create awareness – but making this direct impact on lives was “beyond our wildest hopes”, she said.

“I just assumed that people would be more interested in volunteering or donating money,” said producer/director of the episode, Ms Hoe Yeen Nie. “But for someone to come and say ‘we are going to share their lives with this boy’, it really is a wonderful surprise.”

‘WHEN ARE YOU COMING TO GET ME?’

Two days before his new parents arrived in Beijing to pick him up, CNA Insider met up with Keyuan and his caregivers at Alenah’s Home.

Packing hadn’t taken long: His belongings – a few pieces of clothes, photo albums of his friends at the orphanage, and gifts like a teddy bear from his parents over the months – fit into a tiny bag.


He’d clearly been anticipating the day he would leave with his new mum and dad. Over the months, they’d kept in touch via Skype weekly – though their limited Mandarin kept conversation limited to the simplest topics.

“Are you getting on the plane tomorrow?” he asked in one final conversation. “What time are you coming to get me?”

They’d also been writing him regularly, and he kept their stack of letters neatly stashed in a box. “Read me this,” he would ask one of his caregivers, Ms Zhang Jing, every time he received a new one, and she’d oblige.

“Dear Keyuan,” one letter from his mum read. “Waiting must be so hard. It’s hard for us too, but we both have something beautiful to look forward to, don’t we?”

His drawings, too, have been of more than just airplanes – they show him with his family against the Singapore skyline.


On the last Sunday, his friends at the home gathered around him, and Keyuan held up an album of his adoptive family’s photos. It was meant to be the customary show-and-tell every time a child is about to leave – he or she shares about their new family.

But the usually bubbly Keyuan went quiet. Perhaps he felt bashful; or perhaps, he just knew too well what it was like to be on the other side, the child listening and wishing it was his turn.

One staff member said: “Keyuan is a very thoughtful child, he won’t say anything upsetting. I know he wants to express (his happiness), but he can’t put it into words.”


THROUGH MANY LOVING HANDS

It has been a long journey for the boy who was born in Wuwei, a small city in the west of China. Nothing is known about his birth parents – at just a few days old, he was found at the gate of an orphanage.

But though he was orphaned, his early years were not without love. A Muslim couple in the same city soon agreed to foster him, after unexpectedly falling for him just as the Yaps did.

Mr Ding Yun Zhi, 64, had not planned on taking in Keyuan - but something struck him when he saw the little boy for the first time. “I wanted him to feel that he was loved, that he had a family, that he was not abandoned,” he said.

They raised him with all the care they would give their own son, and he even started calling them mummy and daddy.

Keyuan's new parents meet his former foster parents, the Dings, in Wuwei.

At the age of four, however, Keyuan was still not able to speak well because of his hearing impairment. So the couple decided to send him to an orphanage in Shanghai that could better help him. 

The centre’s director in turn sought the help of Alenah’s Home in Beijing, which specialised in foster centre for children with special needs. Money was raised, Keyuan had a hearing aid implanted – and he was finally able to learn to speak properly. 

In the two and a half years he was at Alenah’s Home, he made huge progress and touched staff with his big heart. “He’s very smart. He’s like a big brother,” said Ms Zhang Jing. “He’ll help you, he’ll care for you”. 

Keyuan and Ms Yao Chen Xia, the general manager of Alenah’s Home.

“When I told him that we found him a home, he was so happy,” she added.

He kept on asking me if it was true. I’ve never seen him smile so happily before. It’s like a miracle for us.

For his new parents, it seems as if his adoption has been the result of the efforts of many, all aligning to help him find a home. “We really feel that Keyuan is a gift who has come to us through many loving hands,” said Dr Lim, a senior consultant with a hospital in Singapore.

His former foster dad Mr Ding put it this way: “As human beings, we share the same emotions. For the sake of bringing up these kids, we do what we can… maybe it’s fate.”

THOSE LEFT BEHIND

When Dr Lim and Mr Yap arrived at Alenah’s Home on a wintry Monday to bring him home, Keyuan – now Lucas Yap Keyuan – ran into his father’s arms, unleashing months of anticipation and joy.

For once, he did not have to be the mature older brother reassuring the younger children – he was just a child himself, happy to be in his parents’ embrace.

WATCH: The long wait is over (7:19)


For the many times he was left behind to wait, though, he must know the thought running through the other children’s heads: When will it be my turn?

“The children would say ‘Keyuan, can we leave with you? Can you ask your dad to take us along too?'” said Ms Zhang Jing.

Ms Yao Chen Xia, the general manager of Alenah’s Home, said: “When a child leaves, the hardest part for other children is having more hope that they, too, will have their turn. We can’t promise them anything, all we can do is try our best to find them homes.”

Every year in China, 900,000 children are born with disabilities. The number of those with birth defects has jumped 70 per cent in the last 20 years. With the lack of social support, many are landing up in orphanages to be cared for.

As a result, centres that were once filled with healthy baby girls (given up by their parents because of China’s one-child policy), are these days full of unwanted children with disabilities.

An orphan at Alenah's home in China.

“Especially for those with more needs, the rate of adoption is lower. We have a girl with a serious brain condition, and she’s been here five to six years,” said Ms Yao.

With the adoption age limit at 14, some never get adopted at all – and end up living at or working for the orphanages that accommodate older children with disabilities. (See related story: Orphan's poignant photos capture life in shelter for unwanted disabled kids)

FROM STRANGERS TO FAMILY

For the lucky ones like Keyuan who do eventually leave with a new family, adapting to the outside world – often, a strange new country and language as well – and getting to know the strangers who are your parents, can be tough to handle.

Keyuan and his parents were in no rush to go home. Dr Lim and Mr Yap had three weeks planned in China, to get the essential paperwork done before they could fly him back to Singapore. This included going back to his birth province to complete the adoption, getting him a passport, and putting him through a medical test for the necessary travel visas.

Keyuan's first plane ride.

“The adoption process (in China) is way more difficult now as compared to 15 years ago,” observed Dr Lim. “Background checks are very comprehensive and onerous.”

Among other things, during the months before the adoption was approved, the Yaps had to undergo a home study to ensure theirs was a suitable home, and take an online course about handling an adopted child.

While in China, the couple also wanted to visit their son’s former foster family and the orphanage where he was found. “There’s someone you love and there’s a huge chunk of their life that you have very little information on. We were hoping to just have a picture in our mind of where he spent the early parts of his life,” said Dr Lim.

It was also a crucial time of getting to know each other - and things seemed off to a blissful start.

Wherever they went, be it for lunch, on the plane ride (Keyuan’s first), or the first few days’ sightseeing around China, the eight-year-old held on tightly to both his parents’ hands.

And even though they couldn’t speak the same language, most of the time, words weren’t needed. The way they looked into each other’s eyes said enough. “Somehow, love just lets you make sense of everything,” said Dr Lim.    


But shortly after they arrived in his birth province on Day 2, the mood shifted. At lunch, Keyuan suddenly went quiet and put his head down on the table.

“I thought he was just tired, but then I saw a tear roll down his face. I realised that he was just really sad. I think all the excitement seemed overwhelming,” said Dr Lim.

It’s a little bit like being kidnapped by aliens. All of a sudden you’re with people who smell different, who eat different food, who don’t understand what you’re saying, and it can be incredibly frustrating and frightening.

Added Mr Yap, a retired architect and stay-at-home dad: “He was probably also grieving the loss that he was feeling from losing everybody whom he loved and everything he has known up to this point.”


There was something in the way the boy kept his face in a pool of his tears, almost ashamed to lift his head lest anyone saw him. An adoption agent said this is common with adopted kids - one child had said, “If I cry, will my parents love me?”

“They try so hard to be lovable,” said Dr Lim. But “part of being in a family is knowing that people will love you no matter how you feel.”


ADOPTION IS A LOT LIKE MARRIAGE

It was early morning on Feb 10 when Keyuan and his parents touched down in Singapore. At the arrival terminal, the couple’s friends and family were waiting with colourful garlands and welcome-home banners.

“You’re finally home, Lucas Yap Keyuan,” read one.

Without prompting, Keyuan walked up to his new siblings and gently called out, “Brother, sister” – as if eager to start his new life with this family. The teenagers, who had initially been stumped by their parents' decision to adopt again, welcomed their new little brother.

The Yaps plan to celebrate Chinese New Year quietly with a few close friends before they take on the next challenge of settling him in. This will include getting new hearing aids surgically implanted – the one he’s been using for the past few years sits only on one side of his head, gives constant feedback and, his parents suspect, is still not allowing him to hear very clearly.

This last fact, in turn, has hampered his ability to process language and so he is “a little bit behind educationally”.

“But he looks like he’s pretty normally intelligent. He has a great attitude and a great personality. A lot of kids, when they have the right situation and opportunities, they catch up tremendously,” said Dr Lim, who plans to home-school him perhaps “for a year or two” until his English is up to par and he can attend school.


In the longer term, they will look into whether to reconstruct his external ears and ear canal, which would require several surgeries. “We will probably wait until he is a little older. We’re taking it step by step.”

For all the extra responsibilities and complex challenges that come with being a parent again, for the Yaps it comes down to this one simple thing: Love is commitment.

“We knew that taking on a child with special needs who’s an eight-year-old would be a major change in our lives,” said Dr Lim. 

But adoption is a lot like marriage. You make a commitment to someone who is not your flesh and blood, and at the end of the day, that’s what makes a family – it’s the commitment.

“If you’re really in love with that person, you take them as they are and you deal with all the implications.”

Watch out for more from CNA Insider on Keyuan and his new family.


Source: CNA/yv

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