Resorts World Sentosa Could Spend More Than S$4.5bn on Expansion Project

Summary

• Analysts say the budget increase for RWS 2.0 is due to cost escalations
• Completion of the project might also be pushed to 2028
• Marina Bay Sands is reported to be facing similar cost issues

Resorts World Sentosa (RWS) could be spending more to attract tourists to Singapore on its ongoing expansion program due to higher material costs. The project, dubbed “RWS 2.0”, had an initial budget of SGD4.5 billion (US$3.36 billion) when it was first announced in April 2019.

The casino resort’s parent company, Genting Singapore Ltd, revealed in a recent conference call with investment analysts that they will likely go over budget in completing the project citing continuing price increases.

RWS 2.0 Could Go Over Budget

RWS is part of Singapore’s casino duopoly, the other half being Marina Bay Sands (MBS) which is operated by a subsidiary of US-based gaming operator Las Vegas Sands Corp.

In 2019, both companies announced they would increase their investment in gaming and add new facilities to their existing properties in a move that would allow them to continue to hold a duopoly on casino resorts in the country until at least 2030. Under an agreement with the government of Singapore, RWS and MBS would each spend SGD4.5 billion on their respective expansion programs.

RWS 2.0 includes the development of new tourist attractions, such as the “Minion Land”, a new immersive themed zone at Universal Studios Singapore. RWS confirmed in its Q4 results that construction of the new facility had begun, with renovations also ongoing at S.E.A. Aquarium, which will be rebranded as “Singapore Oceanarium”.

After announcing an 86% increase in annual net profit for 2022, Genting Singapore Ltd indicated “upside risk” to the initial budget of its expansion program due to cost escalations, according to analysts from global financial services group Nomura. Maybank Investment Bank Bhd issued a similar note, saying “higher material costs” are to blame for the budget overrun.

Furthermore, RWS 2.0 might not be completed within the target date and could be delayed to as late as 2028, up to 12 months behind the completion of the expansion project at MBS, Maybank analyst Samuel Yin Shao Yang said.

MBS Expansion Project Also Subject to Cost Increases

MBS earlier amended its agreement with the Singaporean government, extending the deadline for the start of construction works at the property to April 2023. But that could be pushed back further, with Las Vegas Sands indicating in its latest filing to the SEC that it is unlikely to timely commence its expansion project in April 2023. The company also anticipates cost overruns due to factors beyond its control.