Sands, Genting In A Singapore Sling

Feb 21, 2009 10:01 PM
Staff & Wire Reports |

Cost overruns hurt casino operators' shares.

It's a sure bet that casino companies have to keep expenses in line as their revenues dwindle. Las Vegas Sands and Genting International came up short Friday on talk that their over-budget Singapore projects are even more over-budget than had been thought.

Both companies saw their stock-market values tumble while other casino operators with Asian operations had a good day as China loosened visa restrictions on potential gamblers.

Stock in Las Vegas Sands (LVS) fell by double digit percentages on Friday afternoon after a Singapore newspaper reported that it, and Malaysia’s Genting International (GIGNY), were suffering from spiraling cost overruns at their casino and hotel projects in the island country.

Sands’ shares fell 5.1%, or 14 cents, to $2.61, in afternoon trading in New York. Earlier in Singapore, Genting lost 16.7%, or half a Singapore cent (0.3 U.S. cent), to 42 Singapore cents (27 American cents).

Nevada-based Sands recently revised the cost for construction of its Marina Bay Sands casino-resort to $5.4 billion, compared with an earlier estimate of $4.5 billion and an initial estimate of $3.2 billion. Genting’s Resorts World at Sentosa, scheduled to open early next year, will cost $4.3 billion, compared with the previous forecast of $3.9 billion and the initial $3.4 billion.

Meanwhile, gaming stocks of casino operators with properties in Macau were mostly up on Friday after government officials sought to ease some travel restrictions for the Chinese gambling enclave and Hong Kong.

In October, some residents of the Guangdong province were limited to visiting Macau once every three months. Tightened visa restrictions added to already-reduced casino traffic and revenues as casino operators around the world have been hit by economic downturn and a tight credit market, forcing leisure and business travelers to curb discretionary spending for activities like travel and gaming.

JPMorgan analyst Joseph Greff said that the proposal to loosen the visa restrictions will have more of an impact on the general gambling clientele than VIP business. "While last night's news, once passed/enacted, will help mass market trends, we still expect soft VIP trends given continued junket credit/liquidity issues," he wrote in a note to clients.

Shares of MGM Mirage (MGM) added 19 cents, or 4.6%, to $4.29, while stock in Wynn Resorts (WYNN) gained $1.94, or 8.4%, to $24.94, at midday.

Earlier this month, Portugal’s Lusa News Agency leaked January gaming revenue data from Macau, reporting that year-over-year revenues in the Chinese gambling hub fell around 17.0%, with Sands losing market share.

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