In this report, we review the status of the ongoing construction of Singapore's S$14.4bn integrated resorts (IRs), investigate market concerns over Las Vegas Sands (LVS) financial position, gauge the impact that the IRs would have on the economy as well as the impact on the banks, hoteliers and retailers. We argue that the Genting Group will be the biggest winner and reiterate our Buy recommendation.

Despite the overhanging cloud of worries, we believe LVS will be able to declare the IR open by January 2010, albeit not fully completing the GFA. We believe the group has raised enough capital to ensure that its incremental S$675mn equity contribution to the project is met. Our concern lies in 2010 where we think its earnings targets are optimistic and meeting debt covenants may be a challenge.

However, we are not unduly worried about the impact on the Singapore banks. Even in the unlikely event that LVS fails to make incremental capital injections in2009-2010, we believe a “white knight” will emerge to pick up this national strategic asset and there is sufficient equity buffer before banks take a hair cut. We estimate that UOB has the highest exposure (9% of its Tier 1 capital) to the IRs, while DBS and OCBC are at 5% and 7%, respectively.

We expect the IRs to increase visitation to Singapore by 2.5mn arrivals pa, or about 25% increase from the 9mn forecast in 2009. This will cushion the supply increase and help the likes of CDL Hospitality Trust. On the retail front, the two IRs represent 17% of new supply coming on-stream but we think the likes of suburban retailers such as CapitaMall Trust will hold up better.

We believe Genting will emerge as the biggest winner from the opening of the IRs. The contribution through its subsidiary GIL should increase exponentially from 2010 especially with the group’s ability to leverage its powerful customer network to cross-market. Meanwhile, contribution from Malaysia remains a cash cow and the group has strong balance to take advantage of distressed assets globally. Valuations remain appealing to us at 12x 2009E P/E and a 48% discount to RNAV.