Up to 4,000 incremental ETG seats estimated for Asia within five years
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Union Gaming Research thinks that all Macau operators will continue to look at ETGs as the answer.
“We estimate that there are nearly 5,000 ETG seats in operation in Macau and Singapore, with likely another 2,000+ spread throughout other Asian gaming markets like Cambodia, South Korea, Philippines and Vietnam,” the report noted.
In Macau, and in the context of the market-wide table cap, the report has have noticed most operators embarking on efficiency exercises that ultimately pull live-dealt traditional table games from the lower-end mass market and reallocate them to VIP or higher-yielding mass market segments. It added that, in turn, and in order to accommodate lower-end mass market play, these customers are being pushed towards ETGs as the best option to play at low stakes (e.g. us$ 25.7 per hand on baccarat). “As a result, it is not uncommon to see mass market casino floors with table minimums of us$ 64.4 and up during most day and week parts, while at the same time seeing new stadium-style ETG installations in a multi-game format (baccarat, roulette and Sic Bo). Stadium installations are in place at all of the mass-market focused SCL properties, as well as MPEL’s City of Dreams,” it added.
With an increased focus on table game yields and the likelihood of any new tables under the table cap scheme being exclusively allocated to new properties, Union Gaming Research thinks that all Macau operators will continue to look at ETGs as the answer. “Ultimately, we think the Macau ETG market could grow from over 3,500 seats today, to at least 5,500 within the next five years”, it assured.
With regard to other Asian countries, the report says that, in Singapore, operators are constrained by the way the regulatory body classifies ETGs and as such, we it does not anticipate significant changes to the ETG installed base over the near or medium terms. “However, in other markets like Cambodia, ETGs appear to be in a strong growth phase, with a host of operators turning to ETGs for efficiency purposes and as they yield their existing live-dealt traditional table games”, the note added.
“In addition to the 2,000 new ETG seats we expect in Macau, we would anticipate demand for another 1,500 to 2,000 ETG seats in other regional markets, driven by the four Manila Bay (Philippines) resorts coming online, as well as other new projects like Ho Tram in Vietnam and the second Naga casino in Phnom Penh. In summary, within the next five years we would expect incremental demand for at least another 3,500 to 4,000 ETG seats throughout Asia”, it points.
SHFL ETG revenue opportunity of us$ 36mm
Given the strong performance of SHFL’s Rapid series in markets like Singapore and Cambodia, along with a likely refresh of its stand-alone fully-automated product, the firm believes that SHFL should capture at least a one-third share of the new ETG market (1,155 to 1,320 seats sold by SHFL). In addition, and assuming a favorable legal outcome in Macau, it believes that the company would likely gain an incremental 300 to 500 seats. “Combined, we believe SHFL should place between 1,455 and 1,820 ETG seats through 2017. At a sales price of approximately us$ 20,000 per seat, the revenue opportunity for SHFL is us$ 29.1mm to 36.4mm. We estimate this will translate to an incremental us$16mm to us$ 20mm in EBITDA for Shuffle Master cumulatively over the expansion period,” the report affirmed.
ETG types: stadium and stand-alone; live dealer and fully-automated
There are two primary ETG installation types, stadium and stand-alone. A stadium installation typically consists of a large number of wagering terminals (seats) arranged in multiple banks and rows, with all terminals tied to a game or multiple games (any or all of baccarat, roulette or Sic Bo). Some stadium installations have up to 200 seats. A stand-alone game typically consists of five to ten seats configured in a semi-circle or circle that are all attached to a single game type.
The report further noted that many stadium installations also incorporate a live dealer or dealers depending on whether the installation is a single game type or multi-game. A live dealer installation would incorporate a live dealer along with a traditional baccarat, roulette or Sic Bo table, all of which are electronically tied to the wagering terminals. In some cases, a stadium terminal might be linked to many live-dealt tables to allow a customer to wager on several games (e.g. three roulette wheels) at the same time. Stand- alone games are typically fully-automated with no human input required for operation.
The installed base of ETGs in Macau and Singapore is dominated by six companies, who collectively have a market share in excess of 90%. These companies are: Aruze Gaming, a subsidiary of Universal Entertainment, Alfastreet, a privately held Slovenian gaming equipment manufacturer, Elektroncek, under the Interblock brand name, a 50%-owned subsidiary of Aristocrat Leisure, Novomatic, under the Austrian Gaming Industries brand, a privately held Austrian gaming equipment manufacturer, Paradise Entertainment, under the LT Game brand, and Shuffle Master.
The regulatory schemes of Macau and Singapore allow for ETGs to be deployed on casino floors, although the classification schemes can vary depending on the level of human involvement. In Singapore, the CRA (regulatory body) considers ETGs to be part of the slot floor, regardless of human involvement (e.g. live dealer with electronic wagering), with each casino limited to no more than 2,500 electronic gaming positions. In Singapore, each ETG seat counts as one electronic gaming position.
In Macau, a 100% automated ETG (no live dealer) would be recognized by the DICJ (regulatory body) as part of the slot floor with each ETG seat counting as one electronic gaming position. However, if an ETG in Macau requires human involvement (e.g. live dealer), as is the case with most of the stadium-style installations, these games are classified as table games and therefore are part of the total table allocation for each operator and subject to the market-wide table cap. These live dealer ETGs are classified at a very favorable ratio relative to a traditional baccarat table that has nine seats (a 9:1 seat to table ratio) as the DICJ applies a ratio of 50:1 or 60:1 for these ETGs. In this case, for a given dealer, the casino could accommodate 6x to 7x more customers per DICJ-allocated table game.
“We believe that in both Macau and Singapore, ETGs, generally perform inline to above house slot win/day averages. In Singapore, an IR operator’s analysis is a bit clearer than in Macau given that all ETGs are classified as slot machines. As such, so long as an ETG seat performs at or above slot floor average (LVS reported us$ 665 in 1Q12), it essentially earns its keep. In Macau, however, with the hybrid approach by the DICJ, a casino operator in certain instances would compare ETG seat win/day against its traditional table games (win per mass market traditional table seat of us$ 792 in 1Q12), while in other instances comparing ETG win/day against its slot floor average (us$ 282 in 1Q12),” it concluded.