Saturday, October 25, 2008

What will happen to our IRs/Casinos....?

Remember the petition by Singaporeans against the building of the IRs? Remember the many voices urging the govt not to go ahead and jump onto casino the bandwagon. Even before our casinos are built the casino business has gone into a long term slump. There are plans to build casinos in Phillipines, Thailand and more casinos in Macau.
Sands is now in financial distress as it is unable to borrow money for its expansion. Its revenue is falling and there is a real risk that it won't be able to service its debts if the economic slump worsens.

I remember many people talking about our govt move to "join the casino party" so late as being a wrong one. The decision was made at the height of the casino bubble similar to our govt decision to sling cash into silicon valley at the height of the bubble in March 2000.

0158 GMT [Dow Jones] Singapore banks at risk of credit losses from funding Marina Bay casino-resort as operator Las Vegas Sands under financial distress, says UOB KayHian. Notes U.S. gaming group''s US$8.8 million loss in 2Q08, with debt/equity ratio at 3.9X while interest cover at only 0.83X, share price down 88.3% year-to-date. All 3 Singapore banks among total of 19 lenders involved in S$5.4 billion credit facility for casino-resort, with all 3 acting as lead arrangers. "We understand they are still holding the bulk of term loans allocated. The only exception could be UOB as it participated through UOB Asia, its investment banking arm." Says UOB could have distributed portion of its term loans to some other foreign banks. Downgrades OCBC (O39.SG) to Hold from Buy, cuts target price to S$6.55 from S$9.80. OCBC off 4.9% at S$5.61, DBS (D05.SG) off 6.9% at S$10.80, UOB (U11.SG) off 4.8% at S$13.82. (FKH)


Anonymous said...

Even at the best of times, benefits of IRs are questionable. They din do much for aussie or malaysia did they?

Looking on the bright side, you may get to buy DBS at $4. Maybe they will "rescue" UOB at $1 this time. Like how they "rescued" POSB.

Anonymous said...

IR was a good idea, didn't you know the wife of our PM is such a gambler?

Anonymous said...

look at this government clown who now peeing their pants by borrowing the Sand management's mouth to say that there are jobs for 10,000 to create the illusion for gambling business here when the fate of the IR is sealed ! Obviously they are trying to make everything look good and normal where it is not.

Anonymous said...

I don't know whether it is good to speculate buying sands share (lvs).

What I am thinking is that the PAP may bailout sands (through GIC or Temasek) to save face on the marina project. Maybe inject cash into the company while the citizens starve.

Haven't bought yet, waiting for the outcome of Sheldon Adelson begging of asian banks.

Anonymous said...

so what if they inject $$$ to complete the project in 2009, in the eye of the financial storm? the operating costs to maintain the white elephants will be mounting RED. All foreigners pulling their cash out of Asia to save their asse(T)s in US and UK. Which smart duo will have cash to burn in Casions?

I predict either that those PAP clowns will postpone the completion date by giving lame excuses or turn the resorts to the sex industry.

Anonymous said...

Although I credit the SG gov for many decisions that were far-sighted, I strongly disagree with the IR and Formula One investments.
1. Tourists and highrollers will only come if economy is good. It now looks bad and will be bad (hasn't bottomed yet) for at least 3-5 years before the cycle starts to go up. Bad timing.
2. The intended targets (highrollers and family-oriented tourists) do not see S'pore, with its reputation of strict, draconian laws, as providing a more "fun" environment for entertainment and activities outside of gambling.
3. Other places (S.Africa, Australia, Las Vegas, even Atlantic City) have more land to build crowd-drawers - more attractions, roller coasters, theme parks etc. We just cannot compete. Look at how badly the wheel is doing.
Formula one also bad - with increasing oil prices, trends toward oil conservation (and not oil guzzling cars), I'm afraid the benefits of casino and F1 racing just do not add up.

Anonymous said...

unless you belive absolutely nothing can be done to salvage the marina ir after sands, you shudnt lose sleep over this. these things can be easily recapitalised and new partners, perhaps kepland or CDL etc, roped in for a steal of the original costs. foreclosure when and if it happens isnt necessarily a bad thing. distressed assets of this size attracts SWFs like bees to honey.

Xtrocious said...

Actually, IMHO, they have already "hedged" against this risk...

That's why all the winning bids were foreigners - the ball (risk) is now in their court...

Can you imagine what would happen if CapLand or KepLand won the bid and end up with an expensive white elephant?

Anonymous said...

hmmm.....wonder how long before the cabinet allows this to be reported in ST !!

Anonymous said...

I think we will still end up with the white elephants.

When Sands falls, our banks will be laden with huge bad debts.

Like those minibonds from Lehman, the company went kaput, where to cry father, cry mother?

So, ultimately either Kepland or Capital Land will have to pick up the tab for the unfinished pillars at the marina. Otherwise, it is an eyesore to the world and not befitting our uniquely singapore image.

I would suggest shareholders of these companies to monitor events closely.

Dun wait too long and then have to queue up at Hong Lim.

Anonymous said...

maybe NTUC will get to run the part of its ever expaninding business plan to conquer every sector in singapore...