New Rules Threaten Singapore’s Casinos
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While gambling in Singapore is still a relatively young industry, the government’s control over unwanted behavior in the island city-state is not. The latest rules passed have made it clear that Singapore is very serious about maintaining a short leash on its two casinos operated by Las Vegas Sands (NYSE: NVS) and Genting Singapore (GENS:SP). Both of these casinos have proven to be a smash success in the island city-state so much so that the Marina Bay Sands is LVS’s best performing casino in its portfolio in just over two years of operations.
But, it is unknown how much of that business was generated because they did not enforce the existing rules under the current fine structure. These changes will see the maximum penalty rise from S$1 million to S$200 million. LVS’s revenues from the Marina Bay Sands could easily top $3 billion US this year. Again, Singapore’s government is serious about enforcing the S$100 fee for locals to enter the casino as well as detailed record keeping, which would minimize money laundering through Singapore.
At least Singaporeans are allowed to gamble in their local casinos, albeit for a price. In both China and Vietnam they have to be bussed over a border in order to partake. And Asians love to gamble. Macau has become, by far, the biggest gambling den in the world. Put down a baccarat table anywhere and it is like as not that people will sit down immediately and start betting.
What’s the takeaway here? How much is the S$100 entrance fee going to dissuade the Singaporean, when one in six has a net worth of more than $1 million US, from gambling? Why would a company like Las Vegas Sands jeopardize a multi-billion dollar business over it? If the fees and regulations on locals become onerous then it will just chase gambling out of town. Kuala Lumpur is an hour away and flights are less than $100, in which case Genting’s Malaysia division gets the direct benefit.
The bigger issue is for Singapore to continue to build its reputation as a quiet, predictable place to do business without the stigma of being an emerging market. While these rules may chase some business away and/or shave a small percentage off of LVS’s margins, the gains are consistent with a number of recent moves by Singapore to attract above-board financial business. Their forcing of over-the-counter derivatives to be cleared in public is an important cog in this plan.
If the shadow banking system in the west can be thought of as a money laundering operation between banks for their toxic real estate assets and interest-rate swaps then it’s clear Singapore is uninterested in that kind of business in any form. These rules will ultimately benefit Singapore’s banking industry to which the Singapore Fund (NYSE: SGF) is heavily exposed at more than 47% of its AUM.
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