Union Gaming Research publishes company research and analysis on the global gaming industry. Our research analysts continually identify and analyze financial information and trends that affect the industry.
- Ameristar Casinos
- Aristocrat Leisure
- Atlantic City
- Bally Technologies
- Boyd Gaming
- Caesars Entertainment
- Downtown Las Vegas
- Galaxy Entertainment
- Genting Singapore
- Golden Week
- International Game Tech
- Isle of Capri Casinos
- Lake Tahoe
- Las Vegas Locals
- Las Vegas Sands
- Las Vegas Strip
- Marina Bay Sands
- Melco Crown
- MGM China
- MGM Resorts
- Online Poker
- Penn National Gaming
- Pinnacle Entertainment
- Sands China
- Short Interest
- Shuffle Master
- SJM Holdings
- Slot machines
- Station Casinos
- Table games
- WMS Industries
- Wynn Macau
- Wynn Resorts
January 15 2013
4Q12 recap - Macau’s gaming regulatory body, the DICJ, has published detailed 4Q12 and 2012 gaming data this morning. We analyze that data herein. As already gleaned from the monthly statistics, total GGR during 4Q12 was MOP80.8bn (+10% y/y and +8% sequentially). This included VIP GGR of MOP54.8bn (+3% y/y and +7% sequentially), mass tables of MOP22.5bn (+31% y/y and +11% sequentially) and slot machines of MOP3.5bn (+15% y/y, +11% sequentially). We estimate that win / table / day in 4Q12 was MOP154,747 (+7% y/y and +7% sequentially), while win / slot / day was MOP2,291 (+10% y/y and +13% sequentially).
2012 recap - Total GGR during 2012 was MOP304.1bn (+14% y/y). This included VIP GGR of MOP210.9bn (+8% y/y), mass tables of MOP80.0bn (+33% y/y) and slot machines of MOP13.2bn (+16% y/y). We estimate that win / table / day in 2012 was MOP146,759 (+8% y/y), while win / slot / day was MOP2,174 (+6% y/y).
January 09 2013
This past Saturday (5 January 2013), Paul Y. Engineering (577 HK) filed an offering circular for a HKD3,200mm (USD411mm) capital raise in the form of HKD800mm (USD102mm) in new shares and another HKD2,400mm (USD308mm) in convertible bonds. The purpose of the capital raise is the acquisition of Falloncroft SPA and subsequently development of Falloncroft’s USD800mm boutique premium mass market-focused casino, known as Louis XIII, at the south end of Cotai, as had been previously announced. Net proceeds would be HKD3,072mm (USD395mm), with an upsize option (shares and convertible bond) for an additional net HKD1,536mm (USD197mm), and a contingent placing of another net HKD1,536mm (USD197mm) in convertible bonds, that would effectively constitute the entirety of the development cost if the upsize and contingency were exercised.
As we wrote back in September 2012, the entire project budget is approximately USD800mm, of which nearly half would be accounted for by the above share and convertible bond issuances (or effectively 100% of the budget in the event the deal is upsized and the contingency is exercised), with the balance accounted for via debt financing outside this transaction. We believe the group already has access to a USD300mm credit facility.
January 04 2013
We have analyzed the potential impact of Macau’s partial smoking ban based on known mainland Chinese smoking behaviors and conclude that there will likely be very little (if any) negative associated impact. Even when using a set of punitive assumptions, we believe the worst-case-scenario implies no more than a 40bps impact on 2013 GGR growth.
Profile of a typical Chinese smoker - According to the Global Adult Tobacco Survey released in 2010, 45% of Chinese men and 2% of Chinese women are daily tobacco smokers. Separately, according to data released by The Lancet (medical journal), among those who smoke daily, Chinese men and women go through 16.6 and 12.8 cigarettes, respectively, per day. Assuming the average person is awake for 17 hours per day and it takes 4 minutes to smoke a cigarette, it means that the average Chinese man and woman spends 1.77 and 0.06 minutes per hour, respectively, smoking cigarettes. This equates to the average man spending an average of 3% of each waking hour smoking, and women spending just 0.1% of each waking hour smoking.
January 02 2013
Border gate bursting at the seams - Yesterday marked the start of mainland China’s three-day New Year holiday (1st - 3rd January). When coupled with the opening of Guangzhou-Zhuhai Intercity Railway on the previous day, the Gongbei / Macau immigration checkpoint recorded 280,000 total crossings. Macau authorities estimate there will be over 800,000 total crossings during the three-day period. To cope with the crowds, the China immigration facilities activated their contingency plans, which entailed opening all inspection channels and assigning 90% of them for Mainland residents. We note that the immigration facilities on the China-side were operating near peak capacity (stated maximum daily throughput of 150,000 persons in each direction) with 280,000 total crossings out of a theoretical maximum of 300,000. This could therefore put increased pressure on Chinese government to complete the immigration building expansion project that will take maximum daily throughput to 350,000 persons (+133%) in each direction. While no official pronouncements have been made, we continue to believe that construction is on track for the expanded facilities to be operational by Chinese New Year on 10 February 2013.
January 01 2013
Yesterday, Macau’s smoking ban on 50% of casino floors went into effect with all casinos appearing to be in compliance. The casinos we observed have all employed 4-meter-wide buffer zones to separate clearly delineated smoking and non-smoking sections, as opposed to the other options available in order to comply with the law, which include the much more intrusive and costly options of: 1) upgrading HVAC systems to create walls of air, or 2) the construction of physical walls. In our opinion, the Cotai operators are generally in a better position to more efficiently create non-smoking zones, although we believe that initial fears of several hundred basis points of negative revenue impact across the entire market are likely overblown.
We walked every flagship casino floor yesterday and noticed a customer preference for smoking tables, although only a minority of customers was actually smoking. That said, we believe there are enough smoke-friendly tables currently in the market to accommodate patrons who wish to smoke during all but the busiest of periods (e.g. Chinese New Year or a holiday weekend).
January 01 2013
December GGR +19.6% - Macau released December gaming revenue data this afternoon. GGR grew by 19.6%, to an all-time record of MOP28.2bn (USD3.5bn). This was inline to slightly above recent expectations for mid / high teens growth during the month. For the full year 2012, GGR was up 13.5%.
Daily GGR eclipses MOP900mm - During December, daily GGR was MOP911mm (USD114mm). This, of course, was the highest daily GGR on record, besting October’s daily GGR of MOP893mm by 2% despite not enjoying the benefit of a major gaming-centric holiday like Golden Week.
December 31 2012
As of this morning, the first phase of the Guangzhou-Zhuhai Intercity Railway became fully operational with the completion of the final 23 kilometer section to the Gongbei (Macau) terminal station. We visited the newly opened terminal station today and rode the train. With the railway completely open between Guangzhou and Zhuhai’s Gongbei, the journey now takes between 67 and 82 minutes, depending on how many station stops a particular train makes, as compared to a 2+ hour bus ride previously. Ticket prices range from RMB 70 to 90 (~USD 11 to 14) for a one-way ticket in 2nd class and 1st class, respectively. This compares to about RMB 60 (~USD 10) for a one-way bus ticket.
The railway opened to little apparent fanfare and only limited media exposure. Despite this, we estimate trains were running at 40%+ capacity today from Guangzhou to Zhuhai and we expect occupancy to increase significantly over time (on our previous journeys we noticed nearly fully occupied trains between Guangzhou and Zhuhai North station). Currently, there are 25 scheduled trains in each direction per day, with another 10 “stand by” trains in each direction that can be added depending on demand. Each scheduled service has eight cars per train and up to ~100 seats per car with a total seated passenger capacity of 631 per train. Additional tickets can be sold for standing passengers if all seats are sold out. The railway’s hours of operation (7am to 11pm) roughly map the opening hours of the immigration facilities (7am to midnight).
December 17 2012
According to the South China Morning Post, after over a decade of service, 64-year-old Bai Zhijian is going to step down as the chief of the Central People’s Government Liaison Office in Macau. His position will be succeeded by Li Gang, the current deputy director of the Hong Kong Liaison Office. Li has been in the Hong Kong office for nine years and will step up as Beijing’s top representative in Macau sometime early next year. While the “chief” posts are usually assigned to Central Committee members, it is believed that Li’s experience in handling complex issues in Hong Kong has equipped him well to run the Macau office.
Recently the current chief of the Macau Liaison Office, Bai, commented that he does not expect Beijing to change any policies regarding Macau (i.e. there is no contemplation of punitive actions). In addition during the 18th National Congress of the Communist Party of China, incoming Macau chief Li reiterated that Beijing's policies towards its SARs (i.e. Hong Kong, Macau) will remain unchanged.
December 14 2012
We believe that a casino-like venue has quietly begun operating at the Mangrove Tree Resort in Sanya in China’s Hainan province. It is operating on a trial basis, and is not a casino in the traditional sense of the word. Rather, it is a very low stakes, non-cash (prizes only), entertainment venue that allows select customers to play table games that are found in typical Asian casinos. We believe that such a venue might best be viewed perhaps as a gift from the government in an attempt to allow Sanya resorts to keep cash flow in the black as occupancy at some of the higher-end resorts in Sanya remains quite low, likely resulting in net losses.
We believe this represents a headline risk to Macau and nothing more - Rumors have existed for quite some time regarding Beijing possibly legalizing traditional casino-style gaming in Sanya. While some might view this as an opening that can / will be exploited, we do not believe the opening of this entertainment venue represents any change in official Beijing policy towards gaming in the mainland. In fact, mainland authorities have recently been conducting widespread raids on illegal gaming venues and destroying thousands of gaming machines and related equipment representing the culmination of investigations that have been in progress for many months (and in some cases many years). We do not think the central government has any appetite to expand legal gaming beyond Macau.
December 12 2012
According to Macau Business Daily, the director of the Central People’s Government Liaison Office to Macau, Bai Zhijian, has said that ongoing measures against corruption in the mainland and the PRC government’s thoughts on Macau’s casinos are “two different matters.” This was in response to a recent “rectification” campaign that China’s new Party head, Xi Jinping, proposed as a means to intensify anti- corruption and anti-money laundering efforts. In addition, on the heels of recent media reports on the arrests and detentions of individuals associated with certain Macau junkets, Mr. Bai also commented that he does not expect Beijing to change any policies regarding Macau (i.e. there is no contemplation of punitive actions). The Macau Secretariat for Economy and Finance, Francis Tam also made a similar comment last week in that he is not aware of any policy change from China regarding Macau’s VIP business.
We continue to believe that the central government has not changed its policies towards Macau and there are no punitive actions being taken against Macau or its VIP segment. Individual incidents (like the arrests mentioned above) are likely to be related to the consolidation of power currently underway in Beijing. We believe 2013 will see a resumption of growth in the VIP segment – likely in the mid / high single digits, while the mass market segment continues to roll along with growth in the 25%+ range, driven by continued penetration into China on the heels of numerous infrastructure projects.
Current junket “noise” likely related to consolidation of power in Beijing; buy Macau names on conti
December 04 2012
A flurry of recent media reports on the arrests of individuals associated with certain Macau junkets resulted in notable declines in shares of Hong Kong-listed Macau operators on Tuesday, and on Melco Crown’s US listing overnight. We think this selling represents an over-reaction to events that we believe are largely “non-events” with respect to Macau’s VIP volume and would therefore be buyers on any continued weakness.
There is a precedent for this kind of activity - Most of the recent arrests / detentions of junket associates appear to have had close ties to Bo Xilai, the now-disgraced Chinese politician. It makes sense to us that in the context of the transition of power in Beijing that the reverberations would be felt in Macau. We believe that these arrests / detentions come as a result of the consolidation of power by Xi Jinping (Bo Xilai was his primary adversary) who recently succeeded Hu Jintao as the top party member. We would point out that a similar spate of arrests / detentions occurred towards “unfriendly” junkets when Hu Jintao assumed control of the party and ultimately the armed forces, from Jiang Zemin. We believe that when these arrests / detentions occurred in the past, it has largely resulted in a market share shift of VIP volume, rather than an overall market-wide VIP decline (hence the contradiction between November’s decent GGR numbers and the media reports of some junket(s) saying business was down 20% in November). We would expect the current situation to play out in a similar fashion with a market share shift amongst junkets. This being said, the timing of events works out very well for Beijing as the specter of renewed violence on the heels of Broken Tooth’s release from prison likely provides adequate cover.
December 04 2012
Task force meets to discuss progress - The fifth Hong Kong-Zhuhai-Macau Bridge (HZMB) task force meeting was held in Zhuhai last month, during which progress made on the construction this year and work plans for 2013 were discussed. Currently work on each section of the bridge has started and progress has been made, namely the main bodies on the East and West Artificial Islands have been completed; construction on the Zhuhai extension line Gongbei north tunnel and HK immigration port and extension line have begun, and foundation work has begun on the Macau-Zhuhai-immigration artificial island.
December 03 2012
November GGR +7.9% - Macau released November gaming revenue data this afternoon. GGR grew by 7.9%, to MOP24.9bn (USD3.1bn). This was inline with our expectations for mid/high single digit growth during the month. The calendar was slightly favorable with one extra Friday as compared to last year. On a YTD basis, GGR is now up 13.0%.
Daily GGR still impressive - During November, daily GGR was MOP829k (USD104mm). This amount was generally higher than most of the immediately preceding non-holiday months, which is encouraging in our view as we head into 2013. Further, we note that the sequential November GGR decline in 2012 relative to October was only 7%, which is favorable as compared to the declines in 2011 (-11%) and 2010 (-8%).
Macau round up: Macau taking pre-emptive measures in advance of ex-gang leader’s release; new slot p
November 26 2012
Five arrested over the weekend - Over the weekend, Macau police arrested five people allegedly associated with triad activities in Macau, one of which, Artur Chiang Calderon, is said to be a key player in the so-called 14k triad society. We believe the police’s pre-emptive measures are to brace for the upcoming release from jail of the notorious (triad) gang leader, Wan Kuok-koi aka “Broken Tooth.” He was originally sentenced to 15 years in prison in 1999 and is scheduled to be released this coming Saturday.
Local media has also reported that Macau police have put together a watch-list of triad-associated persons, while China’s Liaison Office in Macau was rumored to have sent a representative to talk to and advise Broken Tooth prior to his release. This was likely part of an effort to emphasize China’s priority to keep Macau safe and prosperous.
November 14 2012
Extending the operating hours at Hengqin-Lotus (Cotai) checkpoint - During the Chief Executive of Macau’s ongoing 2013 Policy Address, the portion related to public security mentioned extending the operating hours at the Hengqin-Lotus (Cotai) checkpoint. The same proposal was also recently discussed during the Zhuhai-Macau cooperation task force meeting last month. Currently, the operating hours are from 9:00am to 8:00pm for visitors at Hengqin-Lotus. While specific details of the address regarding this matter might be released later this month during the Secretary for Security policy guidelines presentation, we believe the implementation of longer hours could eventually occur at both land immigration checkpoints, the Barrier Gate (currently 7:00am to midnight) and Hengqin-Lotus sometime next year to help alleviate congestion. We think that the hours could ultimately move to 24x7, although likely in gradually expanding stages at both locations. The Chief Executive also mentioned that they are waiting on Beijing’s approval of longer hours given that the checkpoints on the mainland side would need to mirror the hours of Macau’s immigration checkpoints.
October 18 2012
This evening MGM China announced that it had accepted the Macau government’s Land Concession Contract for its future Cotai development and has already paid the government its USD56mm premium. The next step in the process, before construction can begin in earnest, is for the contract to be published in the Official Gazette, which we believe is likely 5 to 6 months out (similar to the timeframe following Wynn Macau’s premium payment). This approval is also in line with government commentary that suggested two projects would be approved this year, although we believe many had discounted this possibility with respect to MGM.
Likely a 2H16 opening - In addition to the gazetting process, MGM will also need various other approvals, such as construction, design, and labor. With this in mind, we suspect that construction will likely begin in 2H13, and assuming a 36 month development timeframe would imply a 2H16 opening. As previously communicated, the project is anticipated to cost USD2.5bn, and contain up to 500 tables, 2,500 slots and 1,600 hotel rooms, in addition to various and as-of-yet undisclosed non-gaming amenities. Upon gazetting, we suspect the company will also unveil the brand name of the project, which could likely be a recognized brand that already exists within the company's portfolio.
October 17 2012
Macau’s gaming regulatory body, the DICJ, has published detailed 3Q12 gaming data. We analyze that data herein. As already gleaned from the monthly statistics, total GGR during 3Q12 was MOP74.6bn (+6% y/y and flat sequentially). This included VIP GGR of MOP51.2bn (-1% y/y and -2% sequentially), mass tables of MOP20.3bn (+30% y/y and +7% sequentially) and slot machines of MOP3.1bn (+11% y/y, -4% sequentially). We estimate that win / table / day was MOP144,375 (+3% y/y and -2% sequentially), while win / slot / day was MOP2032 (+1% y/y and -7% sequentially). Please see Figure 1 in PDF for details.
VIP revenue drops below 70%; we think 2013 EBITDA margins +200bps y/y - For the first time in 11 quarters, VIP revenue accounted for less than 70% of total market-wide GGR at 69% in 3Q12 as noted in Figure 2 in PDF. As the combined high-margin business of mass market tables and slots continues to grow well into the double digits (27% or better since 4Q09), which we think should be sustained through 2013 and beyond, the revenue mix shift should continue. Assuming that VIP grows in the high-single-digits in 2013 (a GDP+ scenario), and the combined mass market tables and slots segment grows ~25% or better, we estimate total GGR growth should be in low double digit range, which would be quite similar to likely full year 2012 growth.
Despite what could be similar y/y GGR growth in 2012 and 2013, we remain excited about the mix shift towards mass market and slots. Based on our above growth rate scenarios, we think the 2013 revenue mix should move towards 65% VIP and 35% mass market / slots (for the first time since 2006). Under this scenario, we estimate that EBITDA margins should improve by roughly 200 bps in 2013 due to the favorable business mix shift. Importantly, we don’t think this is reflected in consensus expectations yet, as 2013 consensus EBITDA expectations for the Macau operators show only a 60bps improvement in margin on 12% top line growth. We believe current expectations for 2013 EBITDA might therefore be as much as 6% light at this point.
Macau round up: Golden Week visitation up an estimated 9% y/y; Sands China mass market customer shar
October 08 2012
Through the end of Golden Week, total visitation to Macau increased 9.4% during the October 1 to 7 holiday, with visitation originating in mainland China up even more at 11.1%. Visitation growth during Golden Week of +9.4% (total) and +11.1% (just mainlanders) compares very favorably to YTD visitation through August of +1.1% (total) and +6.6% (just mainlanders).
We would add that the calendar comp was unfavorable, although not captured in the above numbers released by the government, which have a hard cut-off on October 7. Last year, the Golden Week holiday period began on a Saturday (October 1) and ended on a Friday (October 7), which means that it got the benefit of the following two extra weekend days (October 8 & 9) tacked on at the end. This year, the holiday began on a Monday (October 1), but didn't necessarily get the benefit of the prior two weekend days on September 29 and 30 as these days were consumed by the family-oriented Mid-Autumn Festival that likely precluded many visitors from getting a head start on a trip to Macau. Last year the Mid-Autumn Festival fell earlier in the month of September.
October 05 2012
Golden Week visitation booming - Over the first four official days of the National Day Golden Week holiday (Oct 1- Oct 4), we estimate that Macau has received in excess of 535,000 visitors (after adjusting for an anomaly within the official data), representing 16.5% y/y growth.
Mainland Chinese visitation growth accelerating through the week - Through the first four days of the Golden Week holiday, a total of 404,000 mainland visitors have come to Macau, representing a 76% mix of total visitation, and suggesting growth of 16%.
October 04 2012
September GGR +12.3% - Macau released September gaming revenue data this afternoon, with the market growing 12.3%, to MOP23.9bn (USD3.0bn). This was likely below recent Street expectations of mid / high teens growth. We believe the last two days of the month were quite soft due to the timing of mid-Autumn festival, which fell on Sunday, September 30 this year (vs. September 12 last year). With this very important family holiday now out of the way, we believe the first three days of October’s Golden Week (National Day) holiday period have been strong. On a YTD basis, GGR is now up 14.9%.
September 20 2012
Tonight we attended the opening of Sands China’s Phase 2A opening of Sands Cotai Central. The opening of the Pacifica casino at Sands Cotai Central includes about 200 mass market tables, most of which we believe were sourced from legacy Sands China properties. Early next year these tables could be “returned” to the legacy properties when the market-wide table cap expires and the government can allocate additional tables to the company. In addition, over 2,000 of the 4,000 Sheraton-branded hotel rooms are now online (see photos of room product at the end of this note), with the balance expected to open in several blocks over the next few months. As of 2Q12, Sands Cotai Central was operating 145 VIP tables and 217 mass tables at its Himalaya casino at Sands Cotai Central, while system-wide, Sands China was operating 528 VIP tables and 826 mass tables. We believe the system-wide figures are still accurate given the table cap. In addition, incremental retail and MICE square footage has come online as part of Phase 2A.
We note that the new Pacifica casino is very heavy on electronic table games (ETGs), with approximately 280 seats, including the market’s largest stadium installation – a 200-seat configuration of LT Game’s multigame terminals (baccarat, roulette, sic bo). We believe more properties are considering ETG installations as a near-term workaround with respect to the table cap, and as the preferred method of gaming directed at lower-end mass market customers.
September 17 2012
New Macau project - We believe a new Macau casino-resort project, which is not being developed by one of six concessionaires, is in the process of moving forward. This casino likely represents one of the last viable 3rd party casinos in Macau and is a legacy project that was approved by the government many years ago. Importantly, we believe the project is valid in the eyes of the government and holds the necessary approvals with which to develop a gaming resort.
A boutique property - Like many of the existing 3rd party casinos, we believe this new project will be significantly smaller than a typical wholly-owned casino. We think the project will contain only 66 tables and 150 slots, with a development budget of approximately USD800mm. We note that the number of tables would only represent 1% incremental supply assuming the property comes online around 2016 (with a target of late 2015). Further, given recent commentary from the government with respect to how they will think about the table cap (not holding distribution of new tables to a strict annual limit), the project is likely to be given fair consideration from the DICJ when these tables are ultimately requested by the developer. The project will also have 236 hotel rooms (suites), ranging from 2,200 sq. ft. to 15,000 sq. ft. Finally, we believe the property will also contain an ultra-high-end retail experience (exclusively couture and bespoke), suited to the target customer.
August 07 2012
2Q12 recap; good news on MSC construction - Melco Crown reported 2Q12 results today. The company reported adjusted EBITDA of $204mm, which was below both our estimate of $209mm and the Street at $217mm. The downside came primarily from Altira, where VIP gaming volumes were down 23% y/y, and hold, while within the normal range, was at 2.7% vs. 3.1% in the prior year quarter.
With respect to Macau Studio City, the project recently received its construction permit from the Macau government, allowing it to resume construction soon. This should put MPEL in the enviable position of being the second of six new Cotai resorts (one from each concessionaire) set to open beginning in 2015. Despite the property being located on the southernmost parcel of land on Cotai, we like it for a variety of reasons, including direct access to the Cotai immigration building, proximity to one of the Macau Light Rail stations, and allowing the company to target a broader subset of mass market customers. We remain confident that Macau Studio City will be granted the necessary approvals to operate a casino, while the government of Macau will make enough table games available to support this and the other new supply on Cotai.
August 01 2012
July GGR +1.5% despite typhoon - Macau released July gaming revenue data this afternoon, with the market growing 1.5%, to MOP24.6bn (USD3.1bn). This was clearly above recent Street expectations of negative y/y growth owing to a severe typhoon that passed through Macau last week. July’s MOP24.6bn also represented 5% sequential growth despite even worse weather than June. The July 2012 calendar comp was unfavorable with two less weekend days this year as compared to June 2011. On a YTD basis, GGR is now up 16.8%. We note that June 2009 was the last time Macau GGR was negative on a y/y basis.
July 31 2012
July GGR +1.5% despite typhoon - Macau released July gaming revenue data this afternoon, with the market growing 1.5%, to MOP24.6bn (USD3.1bn). This was clearly above recent Street expectations of negative y/y growth owing to a severe typhoon that passed through Macau last week. July’s MOP24.6bn also represented 5% sequential growth despite even worse weather than June. The July 2012 calendar comp was unfavorable with two less weekend days this year as compared to June 2011. On a YTD basis, GGR is now up 16.8%. We note that June 2009 was the last time Macau GGR was negative on a y/y basis.
July 10 2012
Guangzhou-Zhuhai Intercity Mass Rapid Transit update – officials say testing begins in October - Yesterday, Guangdong province officials announced that construction on the Gongbei terminal of the Guangzhou-Zhuhai Intercity Mass Rapid Transit (MRT) should be completed by the end of September and trial runs should begin in October. This is in an effort to have the line operational by the end of this year. This new timeline is one month faster than the last notice that Guangdong officials released in May, which admonished several infrastructure contractors to speed up and demanded that the construction to the Gongbei terminal station be complete by October.
Service on the MRT currently runs between Guangzhou and the Zhuhai North station. At the moment three stations still need to be completed (including Gongbei) with one new station recently completed. Tangjiawan station, the station after Zhuhai North, will soon start trial runs, while Mingzhu and Qianshan stations are nearing completion. Much progress has been made to the Gongbei terminal station since our last update (see pictures below) with the roof beginning to take shape. Although Guangdong officials have now indicated test runs should begin in October, which would imply the entire line could be operational by year-end, we continue to be more comfortable with our previous 1Q13 estimate. Should the project not be operational by year-end, we would expect a push to complete the line in time for the beginning of Chinese New Year on 10 February 2013. With the completion of the final 24 kilometer link of the Guangzhou – Zhuhai MRT, the journey from Guangzhou South station to Macau will take about 45 to 50 minutes, as compared to a two or more hour coach bus ride today.
July 06 2012
Grand Waldo letter of intent (LOI) of disposition signed - The controlling entities of Grand Waldo Hotel in Cotai, Great China and GW Entertainment, are to be acquired by an independent third party for consideration of US$500mm (HK$3.9bn) in cash, as per a LOI announced yesterday by Get Nice Holdings Ltd (64.HK), which owns 65% of the above two entities. We note that the Grand Waldo is one of the four Galaxy Entertainment (27.HK) 3rd party casinos, which form the company’s City Club segment.
Likely a ~33x multiple, although we think the valuation isn’t necessarily based on cash flow - Detailed financials for Grand Waldo’s operations are not published. However, we estimate that the property likely generated in the ballpark of US$15mm in EBITDA on an LTM basis, on GGR of US$70-80mm. The sale price of US$500mm would therefore imply a 33x multiple on LTM EBITDA. However, we think the sale price is most likely derived from an implied valuation on the underlying gaming “license” and / or land. We put the term license in quotes as the true gaming license holder of the Grand Waldo Hotel’s casino is, and must be, Galaxy Entertainment. This might effectively preclude an international gaming operator (with designs on entering Macau) from using the acquisition as a backdoor entry into the market as the property would still need to be managed by Galaxy as per the company’s concession contract with the government. While we believe that a major gaming player who wants to be part of the Macau market could indeed be the owner of a 3rd party casino, this would not convey any sort of rights that the other concessionaires enjoy.
July 02 2012
June GGR +12% on typhoon impact - Macau released June gaming revenue data this afternoon, with the market growing 12.2%, to MOP23.3bn (USD2.9bn). This was below recent Street expectations of mid-teens growth. But for the Signal 8 typhoon that negatively impacted this past Friday and Saturday, we believe June results would have been inline with expectations. The calendar comp was favorable, with two extra weekend days this year. On a YTD basis, GGR is now up 19.8%.
Typhoon kept HK visitors at home; likely dissuaded PRC visits as well - Owing to a typhoon that passed through the region over the weekend, which included the cessation of ferry operations for a period of time (about 10 hours, primary overnight Friday into Saturday), we believe visitation was muted. In general, the typhoon, and warnings thereof leading into the weekend, would have had the effect of keeping many visitors from Hong Kong at home over the long holiday weekend. In addition, the typhoon would have dissuaded some day-trip visitation from Guangdong. We believe the first two days of July (typhoon-free) have rebounded nicely from the last two days of June in terms of visitation and gaming volumes.
June 26 2012
Over the weekend, a Chinese language newspaper in Macau suggested that two things could negatively impact the market, namely 1) a stricter enforcement of visa restrictions with respect to the Individual Visit Scheme (IVS) and 2) a lowering of the foreign withdrawal limit on UnionPay cards. We note that this local newspaper is the only outlet to make these suggestions. No other media, government official or casino operator appears to have any knowledge that these events are, indeed, occurring. To the contrary, the same newspaper today has gone in the other direction and is reporting that the IVS might be broadened to include a greater number of persons in the Guangdong region, while also expanding the number of persons eligible for multi-entry visas to Macau. Importantly, this is also being echoed by media in the PRC.
June 12 2012
UnionPay, China’s national bankcard association, released its monthly Bankcard Consumer Confidence Index (BCCI) for May 2012 (see Figure 1). The index, at 86.53, was up 49bps on a y/y basis (as compared to the 86.11 reported in May 2011). It did, however, decline sequentially for the third time in four months (down 14bps sequentially in May). Despite the recent sequential declines, we note that visitation to Macau from mainland China is up 14% YTD, while spend per visitor is up higher still.
China to add 70 more airports by 2015; 300+ new planes annually - Officials from Civil Aviation Administration of China (CAAC) announced that the country is going to build (or begin construction on) 70 new airports, expand 101 existing airports and relocate 15 airports in the next 4 years, resulting in more than 230 airports in operation by 2015. This is part of China’s current 5 year economic and development plan (2011-2015). In 2011, there were 178 airports serving 175 cities in China with a total passenger throughput of 620 million. Authorities also plan to introduce a minimum of 300 commercial aircraft per year with an expectation to reach 4,700 planes by 2015.
June 01 2012
May GGR of MOP26.1bn (USD3.3bn) - Macau released May gaming revenue data this afternoon, with GGR inline with Street expectations of approximately MOP26bn (USD3.3bn) and growth of 7% y/y. Despite the low rate of growth, May was the second highest GGR on record (3% below last October) and the second highest daily GGR at MOP841mm. While perhaps cold comfort to some investors, we believe that low hold for at least two concessionaires negatively impacted May results. Further, the calendar comp was unfavorable, with one fewer Sunday this year, while last year enjoyed the benefit of the May Day holiday beginning on a Sunday vs. Tuesday this year. On a YTD basis, GGR is up 21.3%.
May 28 2012
Government official reiterates forecast of 10% GGR decline in 2012 - Over the weekend, Macau’s Secretariat for Economy and Finance, Francis Tam, reiterated the government’s GGR forecast of MOP20bn per month in 2012. We do not believe this forecast is based on actual trends or any special insight the government might have into the VIP market. Rather, we think the government, as always, is being ultra-conservative with respect to its budgeting process.
We note that the government’s forecast of MOP20bn per month in 2012 would imply full-year GGR of MOP240bn, which would represent a y/y decline of 10% from the MOP268bn recorded in2011. Further, and based on the MOP99bn already generated from January to April of this year, the government’s forecast would imply GGR of MOP141bn for the May to December period, or a y/y decline of 26% from the prior year period. This would also imply May to December monthly GGR of MOP17.6bn, or nearly 30% below the current YTD monthly run-rate of MOP24.8bn.
May 25 2012
Guangzhou-Zhuhai Intercity Mass Rapid Transit update - It is important to note that Guangdong province officials have recently released a notice demanding several infrastructure projects speed up their construction schedule. Included in this project list is the Guangzhou-Zhuhai Intercity Mass Rapid Transit (MRT) with officials dictating an end-of-the-year completion deadline. At the moment four stations still need to be completed between Zhuhai North and the terminal station at Gongbei (Tangjiawan, Mingzhu, Qianshan and the Gongbei terminus). Tangjiawan station is near completion and the Gongbei terminus (see pictures below) is expected to be finished in October (much progress has been made since our last update). However we believe much works remains on the other two stations, which is why we are more comfortable with our 1Q13 estimate rather than year-end 2012. Should the project not be operational by year-end, we would expect additional pressure to be placed on contractors to finish the line in time for the beginning of Chinese New Year on 10 February 2013.
May 21 2012
We recently began monitoring foot traffic on Cotai to develop a better sense of on-the-ground customer behavior. We measured the number of walk-in entries into each of the four major mass-market oriented casinos: City of Dreams, Galaxy Macau, Sands Cotai Central and Venetian Macao. What we found is that the Sands China properties collectively accounted for 65% of walk-in visitation vs. having an approximate 55% share of mass-market table supply on Cotai. The 65% share of walk-in visitation to SCL properties is broken out with 50% to Venetian and 15% to Sands Cotai Central, which is to say that if a customer begins his Cotai trip at City of Dreams, Galaxy Macau or Sands Cotai Central, there is a 50% likelihood that if he visits another casino, that casino will be the Venetian. Separately, we note that City of Dreams accounted for 30% of walk-in visitation, with Galaxy Macau garnering 5% (see Figure 1 in PDF for percentage breakdown). While the Galaxy Macau share is low at just 5%, we believe this is 1) a function of its distance relative to the tight cluster of CoD, Sands Cotai Central and Venetian, 2) potentially under-representative as some customers use the Cotai Connection shuttle bus instead of walking in order to reach Galaxy Macau from other Cotai properties and 3) understates the drawing-power of Galaxy Macau given the property’s 12% market-wide (Macau + Cotai) share of arriving customers from the three primary entry points to Macau, which was second only to the Venetian during the April and MTD May period.
May 17 2012
Yesterday, the hotel at the under-construction theme park in Hengqin was topped off. The 1,888-room hotel is located in Fuxiang Bay on East Hengqin and will be one of the largest hotels in mainland China with a total construction area of 300,000 square meters. The hotel is part of the RMB 10 billion (USD 1.56 billion) Phase I construction of the Chime-Long International Ocean Resort, which also includes “Ocean Kingdom,” the first of several planned theme parks on Hengqin. Ocean Kingdom is anticipated to include the world’s largest aquarium, and is expected to be operational by the end of this year, although we wouldn’t be surprised if the opening was pushed into 2013. Future phases of the project will be located at the adjacent Hengqin Mountain and Dolphin Bay. These future phases are planned to include up to 9 additional theme parks, 12 luxury hotels, 3 golf courses, 2 international yacht clubs, several shopping malls and convention centers.
April 25 2012
Total visitation +7% in March; Chinese visitation +15% - Visitation to Macau increased 7.3% y/y in March to 2.3mm persons. On a YTD basis, visitation has increased 7.9% y/y, to 6.9mm persons. Importantly, visitation from mainland China increased 15% during the month and is also up 15% YTD.
Favorable Chinese visitor mix drives mass market GGR - In March, fully 62% of visitors came from mainland China (61% YTD), which is well above the 2011 average of 58% and the long-term average of 54%. This favorable customer mix is the driving force behind the strength in mass market GGR. In 1Q12, we estimate mass market gaming spend per visitor increased 26% y/y on an 8% increase in visitation, resulting in 36% GGR growth (mass tables and slots combined). We expect this trend to continue (greater mix of Chinese visitors and increasing spend per visit) on the heels on numerous infrastructure projects that should positively impact Macau over the near, medium and longer terms.
April 02 2012
March GGR of MOP25.0bn (USD3.1bn) - Macau released March gaming revenue data this afternoon, with GGR reaching MOP25.0bn (USD3.1bn). This represented growth of 24% over March 2011, which presented a tough comp of +48%. March 2012 did enjoy a calendar benefit with 5 full weekends, vs. 4 weekends in March 2011. On a YTD basis, GGR is now up 27.0%. We note that March GGR was inline with January’s CNY-boosted GGR and only 7% below the all-time record of MOP26.9bn set in October of last year.
March 21 2012
Hengqin business registrations up 174% y/y - The number of business registrations in Hengqin increased 174% y/y, to 679. Hengqin, which is directly opposite Cotai in mainland China, is undergoing significant greenfield development, which among other things will include a relocated University of Macau, a theme park, and significant residential supply. Ultimately, we believe the population of Hengqin could grow from about 5,000 today, to hundreds of thousands as the area is built out over the next 5 to 10 years. Access to / from Hengqin and Macau is currently served by the Lotus bridge, while a tunnel is currently being constructed. The Guangzhou – Zhuhai Intercity Mass Rapid Transit system is planned to extend from the Gongbei border gate to Hengqin and ultimately to the Zhuhai airport.
March 13 2012
The CPPCC (Chinese People’s Political Consultative Conference) and NPC (National People’s Congress) are essentially an advisory and legislative body, respectively. Macau, as an SAR of China, has delegates in each body. Both the CPPCC and NPC conduct high-level annual meetings, with the CPPCC meeting from March 3 to March 12 and the NPC from March 5 to March 14. We would characterize the annual meetings of both the CPPCC and NPC as venues for delegates to raise locally-oriented issues. We believe that if an issue is raised, the delegate(s) raising the issue believes that there is a high probability that action will ultimately be taken – we think this is especially true with respect to the NPC.
We estimate a potential for nearly USD7bn in incremental mass market GGR - We estimate the implementation of the border gate expansion, longer operating hours and greater utilization of the TIP border crossing puts in place the long-term framework for Macau to ultimately handle up to 49mm annual visitors (hotel room supply notwithstanding, and before the benefit from an expanded Taipa / Cotai ferry terminal, the Hong Kong-Zhuhai-Macau bridge, and a potential airport expansion), which is 75% higher than the 28mm visitors to Macau in 2011 and 25% higher than the 39mm visitors to Las Vegas last year. Based on current mass market GGR per visitor, 75% higher visitation suggests an incremental USD6.7bn in high-margin mass market GGR.
March 12 2012
Macau Light Rail Transit contemplating a direct line to Taipa / Cotai from the HK-Zhuhai-Macau bridge - The Macau Light Rail Transit (LRT) system, on which construction recently began, might build an additional line on the east side of Macau. We believe the proposed add-on would connect the drop-off point of the Hong Kong-Zhuhai-Macau bridge directly to Taipa / Cotai, bypassing the numerous station stops on the Macau peninsula. Although not addressed, we would anticipate this spur line to open sometime after Phase 1 opens in 2016. We would view this spur line as a positive for operators with significant Cotai exposure.
New Macau high rise sells out in one afternoon - Phase 3 of One Oasis, a luxury high-rise residential project located at the foot of the Cotai Strip (in Coloane), sold out in a single afternoon this past weekend. We believe that about half of the initial 220 units were pre-sold, which is inline with presales of Phases 1 and 2. Pricing in Phase 3 could be in a range of HK$5,500 to HK$6,000 per square foot, which compares to Phase 1 at about HKD4,300 (in April 2010) and Phase 2 at HKD5,000 (in March 2011). Of the approximately 1,600 units in the first two phases, about 60% were purchased by Macau residents and 30% by mainland residents. Phase 1 is currently under construction and expected to open sometime during 2013.
March 08 2012
New border checkpoint planned; date and location TBD - The governments of Macau and Guangdong PRC have reached an agreement on the need to ultimately build another border checkpoint between Macau and Zhuhai in order to handle anticipated future demand. This would be incremental to the in-progress expansion of the existing border gate on the Macau peninsula. There are currently two land-based border checkpoints between Macau and the PRC. The primary border gate located on the northern border of the Macau peninsula handled 14.1mm visitors in 2011 (51% of total visitation), while the Cotai checkpoint handled 1.1mm visitors (4% of total visitation). It is likely that the proposed border checkpoint will have longer operation hours than the existing Macau peninsula facility of 7am to midnight.
March 01 2012
February GGR of MOP24.3bn (USD3.0bn) - Macau released February gaming revenue data this afternoon, with GGR reaching MOP24.3bn (USD3.0bn). This represented growth of 22% over February 2011, which was a tough calendar comp as February last year included Chinese New Year (CNY). In order to smooth out the CNY calendar shift, it is important to look at the combined GGR from January and February, which totaled MOP49.3bn (USD6.2bn) and was up 28% as compared to January and February of last year. Even after adjusting for this year’s leap year benefit, we estimate the combined January and February period grew by over 26% y/y.
February GGR was well above recent consensus expectations - We believe consensus expectations for February GGR were approximately MOP22bn, while actual results came in 10% higher. In part, we would attribute this delta simply to the underlying (and under-appreciated) current strength of the Macau market. In our opinion, a strong February jibes with recent comments we’ve heard across the industry that internal expectations are beginning to shift from a market-wide growth forecast of 15% to 20%, to becoming more inline with our forecast of 20%+.
February 29 2012
SJM reported full year 2011 and 4Q11 results tonight. Gross gaming revenue in 4Q11 increased 13% y/y, to HK$18.9bn (down 1% sequentially). This compared to Macau market-wide growth of +33% y/y and +5% sequentially. We estimate that implied consensus gross revenue expectations were just over HK$20bn. Adjusted EBITDA during 4Q11 was HK$1,781mm (+25% y/y and +8% sequentially) and inline with implied consensus expectations of HK$1,786mm.
New estimates - Following the opening of Galaxy Macau (May 2011), SJM’s market share has averaged approximately 28%. We believe that on a full-year weighted average basis, SJM’s 2012 market share is likely to settle around 26.5% when taking into account the new supply coming online in Cotai in April. With our forecast of market wide GGR growth of around 20% this year and contemplating our market share estimate of 26.5% for SJM, we believe the company will generate GGR of approximately HK$83bn. This is a more conservative stance than we had taken previously.
Our revised 2012 revenue estimate for SJM is HK$83bn (from HK$88bn), while our adjusted EBITDA estimate goes to HK$7.5bn (from HK$7.9bn). Finally our 2012 EPS estimate is HK$1.10 (from HK$1.17). We are also introducing our 2013 estimates with revenue of HK$91.7bn (+11% y/y), EBITDA of HK$8.4bn (+13% y/y) and EPS of HK$1.29 (+17% y/y).
February 21 2012
China BCCI (Bankcard consumer confidence index) up - UnionPay, China’s national bankcard association, released its monthly Bankcard Consumer Confidence Index for January 2012. The index, at 86.78, has now risen sequentially for seven consecutive months. The index is currently 144bps higher on a y/y basis, but nearly 70bps below the high of 87.38 set in October 2009. In 2011, we note that purchases via UnionPay totaled RMB 15.9 trillion (USD 2.5 trillion), up 40% y/y.
The benefit of positive consumer confidence trends in China seemingly continue to accrue to Macau. In 2011, mass market table games revenue grew 37%, with growth accelerating in 2H11 (+41% y/y) on the heels of new supply entering the market in the form of Galaxy Macau. We expect continued strong mass market growth in 2012, driven in part by Sands China’s Cotai Central, which will represent the only significant amount of gaming supply likely to come online over the next three to four years. By 2013, we anticipate to see the positive impact of infrastructure projects on mass market revenues, namely the border gate expansion and completion of the rail network from Guangzhou.
February 21 2012
Market share breakdown:
By operator - During December and January, Sands China continued to lead the market with a weighted share of customers of 34.3%, followed by SJM Holdings (27.2%), Galaxy Entertainment (20.0%), Wynn Macau (7.2%), MGM China (6.4%), and Melco Crown (4.9%). Compared to our survey conducted in Oct/Nov, SJM Holdings’ share declined 360 bps, which is not overly surprising given that the company’s share of traffic at the Taipa terminal is significantly smaller than their share at the points of entry on the Macau peninsula. At the Taipa ferry terminal, Sands China had a 51% share, while Galaxy Entertainment was second with a 16% share.
By property - Market shares by property are shown in Figure 3 in the PDF. The top three shares continued to belong to Venetian Macao (22%), the combination of SJM’s Grand Lisboa / Lisboa (15.5%) and Sands Macao (12.3%).
February 06 2012
Macau likely to approve two of the three Cotai land applications in 2012 - Local media is reporting that the Director of Macau's Lands and Public Works Bureau has indicated his department will likely approve just two of the three Cotai land grant applications during 2012. MGM China, SJM Holdings and Wynn Macau all have submitted applications for Cotai land, with expected approvals in the "any day now" status for many months already.
The Bureau noted that they don't have the capacity (manpower) to approve all three applications this year due to associated and various complexities, which is something we can commiserate with, being based in Macau and witnessing in real time how the gears of government grind. However, we believe the primary driver of the decision to approve only two of the applications this year is to intentionally stagger the timing of future development. It is also possible that the Bureau truly is overwhelmed by the application process - not due to a lack of manpower, but rather due to shifting casino development scopes. Given the high stakes, we can certainly envision the operators continually enhancing their proposals to include amenities (e.g. room counts and types, amount of expected local employment, scale of non-gaming attractions, total dollar investment, etc.) perceived to be the most likely to result in first approval.
February 01 2012
Las Vegas Sands reported impressive 4Q11 results, particularly at the company’s Macau and Singapore properties. In Las Vegas, 4Q11 earnings came in below consensus, however, we believe that this quarter’s performance is a direct result from a conscious shift in customer mix, driven by a cut back in promotions, particularly, room comps (explained in greater detail herein). Overall, the company is firing on all cylinders. We would be buyers of LVS shares on continued growth in Singapore and Macau (with few signs of a slowdown and our forecast for 20% market growth) and LVS’ ability to generate significant free cash flow, which could be used to fund an annual dividend or finance future growth opportunities.
LVS 4Q11 recap - In 4Q11, LVS reported total net revenues of $2.54bn (+26.3% versus $2.02bn y/y), EBITDAR (post corporate expense) of $898.8mm and adj. EPS of $0.57. This compares to the Street estimate for revenues of $2.47bn, EBITDAR (post corporate expense) of $884.0mm and adj. EPS of $0.57. Total company EBITDAR margins increased 110bps to 37.8% (versus Street estimate of 35.8%). 4Q11 results were driven by solid quarters in Macau (EBITDA +27.2%) and Singapore (+39.6%), albeit a bit mitigated by a weaker quarter in Las Vegas (+0.4%). It is important to note that LVS’ 4Q11 results were favorably impacted by higher hold in Singapore, which had an estimated $25mm incremental benefit to EBITDA. Using a normalized hold, we estimate MBS’ EBITDA in 4Q11 of $402mm. Lastly, LVS board members declared an annual dividend of $1.00 (payable quarterly). We believe the dividend will be recurring and could be upsized in the future based on LVS’ liquidity needs.
January 31 2012
January GGR of MOP25bn (USD3.1bn) - Macau released January gaming revenue data this afternoon, with GGR reaching MOP25bn (USD3.1bn). This represented growth of 35% over January 2011, which was an “easy” calendar comp as it did not include Chinese New Year (CNY) due to a calendar shift. As compared to February 2011, which did have CNY, January grew 26%, although after adjusting for three fewer days in Feb, we estimate y/y growth was closer to 15%.
January’s 25bn was lower than our forecast - Although January’s GGR of 25bn was the second highest amount ever recorded and represented a sequential increase from Nov / Dec (+7% vs. consensus expectations for little / no sequential growth), it did fall short of our forecast for a new record (by ~3bn). While most of the variance stemmed from lower VIP volumes relative to our expectations for a very big holiday period, we think that several operators also played a bit unlucky (but not dramatically).
January 25 2012
We still think January could set an all-time GGR record - We continue to believe that despite the “slow” start to the month, January could break October’s record GGR of MOP 26.9bn (US$3.4bn). Based on our channel checks, we think VIP operators are generally expecting record gaming volumes this month and assuming hold is within the normal range, it should translate into record GGR. This means that the month will have to be very much back-end loaded, but given the timing of CNY and the likely magnitude of volume associated with the days immediately following CNY Day 1, this makes sense to us and we believe it is achievable. Please see our note “Macau Chinese New Year 2012 preview; a record in the making” from 5 January 2012 for more information.
Casino floors are booming and volume should grow sequentially until Sunday - We have walked most of the major casino floors on each of the past several nights (both on the Macau Peninsula and Cotai) and have seen crowds grow significantly through tonight (CNY Day 3). Table occupancy is very high (or full in many cases) and we’re seeing table minimums grow each day. We expect visitation to continue to grow on a sequential basis through Sunday (CNY Day 7) and expect gaming volumes to similarly grow, ending January on a high note and setting the tone for 1Q12 and beyond.
January 23 2012
Total visits +17% and mainland visits +25% on CNY “Day -3” - According to data from the Macau SAR, visitation to Macau on Chinese New Year 2012 Day -3 increased 17% y/y, to 96.7k visitors (i.e. Friday, 20 January 2012, which was the third day prior to the official beginning of CNY as compared to Monday, 31 January 2011, which was the third day prior to the beginning of CNY 2011). Visitation from mainland China grew by 25% y/y. As we’ve noted before, we think CNY 2012 enjoys a calendar benefit relative to CNY 2011, as CNY 2012 begins on a Monday (23 January) and therefore enjoys the leading weekend. CNY 2011 began on a Thursday. While we acknowledge that the days leading up to CNY, as well as the first day of CNY itself, are seasonally slow from a GGR perspective, we are encouraged by the solid y/y increase in visitation in the days leading up to CNY (growing at a faster rate than 4Q11’s +15%).
We believe double-digit visitation growth continued over weekend - We believe visitation was about 82,000 on Saturday (CNY Day -2), which was a 15% sequential decline day-over-day. The decline stems from familial obligations ramping up as CNY draws closer. Regardless, we still believe visitation of 82,000 on Saturday represented a double-digit y/y increase relative to CNY 2011 Day -2 (which was a Tuesday last year). Further, we would point out that visitation of 82,000 persons was still higher than average daily visits of 78,000 throughout the whole of 2011.
January 18 2012
Center of gravity - There appears to be a growing consensus that an as-of-yet undefined “center of gravity” is shifting to Cotai, from the Macau peninsula. We decided to explore this concept and what it could mean to 2012 expectations. What we found is that 1) despite the chorus of analysts suggesting 2012 is the breakout year for Cotai, their expectations reflect otherwise; and 2) the Street has MPEL wrong (consensus expectations for top-line growth are too low).
Recent trends suggest it’s more or less a fair-share game - While acknowledging that visitation to Cotai is indeed growing, we believe this is due to increased supply rather than some fundamental behavioral shift causing visitors to treat the Macau peninsula as if it were Asia’s version of Downtown Las Vegas. Based on 2H11 results, which captures the new supply at Galaxy Macau, we do not think there is evidence of a shift in customer behavior manifesting in an increased gravitation towards Cotai and away from the Macau peninsula. We do, however, see evidence of Cotai taking market share away from the Macau peninsula based on an increased number of gaming positions – and we expect this trend to continue with the phased opening of Sands China’s Cotai Central.
We estimate that during 2H11 Cotai had 24% of the market’s VIP tables and 34% of its mass tables. Based on our 2H11 forecasts for the operators with Cotai exposure, we are forecasting their Cotai assets to produce nearly 26.5% of market-wide VIP GGR and 34% of mass market GGR. That is to say Cotai properties are punching a little above their weight in terms of VIP win / table and are inline with their fair share in terms of mass market win / table. While we do think that Sands China’s Cotai Central will give visitors another reason to spend more time on Cotai (further enhancing it as a mass market destination), we believe at least a few more IRs are needed in order to achieve the critical mass necessary for visitors to make a conscious choice between visiting only the Macau peninsula or only Cotai.
January 16 2012
This morning, the Macau DICJ published detailed gaming revenue statistics for the 4th quarter and full-year 2011. Herein we present our key takeaways.
Top-level gross gaming revenue - In 2011, Macau’s six gaming concessionaires generated a total of US$33.5bn in gross gaming revenue (GGR), an increase of 42% from 2010. VIP GGR increased 45%, to $24.5bn, mass market tables increased 37%, to $7.5bn and slots increased 33%, to $1.4bn.
Win per table and win per slot - We estimate that average win per table increased 32% in 2011, to US$16,913. This is based on an 8% increase to the average table supply, to 5,193. Assuming that slightly more than 1/3rd of tables in the market were VIP tables, we further estimate that the average win per table for VIP and mass were approximately $34,000 and $6,400, respectively. For slot machines, we estimate that based on an average of 15,210 devices (+6% y/y), win per day was $257, an increase of 25% y/y.
Seasonality - Gross gaming revenues for all segments have historically been back-end loaded. In 2011, 53% of total GGR was generated in the second half of the year, which represented a decline from 54% in 2010 and 57% in 2009. This seasonality has typically been more pronounced with respect to VIP gaming revenues at +100 bps in the second half relative to the market as a whole in 2009 and 2010.
Game popularity - Macau remains dominated by baccarat, which collectively accounted for 91.4% of total GGR in 2011. There were only five game types that generated more than 1% of GGR.
1. VIP baccarat 73.2%
2. Mass market baccarat 18.2%
3. Slot machines 4.3%
4. Sic-Bo 1.8%
5. Blackjack 1.0%
January 16 2012
New regulations that restrict slot parlors from operating in residential areas will be in place by the end of March and the government has determined (as we had expected) that only two slot parlors will face closure under the new guidelines. These two slot parlors are Melco Crown’s Mocha Marina Plaza and SJM Holdings’ Yat Yuen Canidrome Slot Lounge, both of them located on the Macau peninsula. The government will work together with the casino operators to establish a timeline for the parlors’ closure.
The new regulations state that slot parlors must be located within a 500 meter radius of a casino, or must otherwise be located in existing commercial buildings (apparently the Macau Canidrome notwithstanding).
Virtually no impact to 2012 EBITDA - We believe the closure of these two slot parlors will have virtually no impact on our forecasted 2012 EBITDA for both Melco Crown and SJM Holdings. We estimate that the Mocha Marina Plaza, one of MPEL’s nine Mocha clubs, contributes approximately one-half of one percent (0.5%) to EBITDA, the loss of which should be more than offset by the recently opened Mocha Macau Tower (4Q11 being the first full quarter of operations). Further, we believe that Melco Crown has identified another potential development site for an additional Mocha Club facility. With respect to SJM, we estimate the Yat Yuen Canidrome Slot Lounge represents significantly less than 1% of our 2012 EBITDA forecast.
January 06 2012
Favorable Chinese New Year calendar in 2012 - The week-long Chinese New Year (“CNY”) holiday officially begins on Monday, 23 January, so the holiday will also enjoy the benefit of getting a head start as of Friday night, 20 January. This effectively extends the holiday period by an additional two days as compared to last year. In 2011, the holiday period began on Thursday, 3 February and therefore did not receive the benefit of a free weekend at the beginning or end. We note that while the PRC officially recognizes the CNY holiday as only three-days, it is commonly celebrated for seven days (the first of two annual “Golden Weeks”).
We expect record GGR in January driven by CNY - Assuming hold percentage (luck) is within the expected range, we are forecasting January GGR in a range of MOP28bn to 29bn (US$3.5bn to 3.6bn). This would imply 51% to 56% growth as compared to the previous January and 41% to 46% growth as compared to the previous February, which included CNY 2011. Further, GGR of MOP28bn to 29bn would be 4% to 8% higher than the previous all-time record of nearly MOP27bn in October 2011 (driven by the second of the two annual Golden Weeks). Finally, we note that our January 2012 forecast is up against a January 2011 comp that will be one of the easiest of the year, at “only” +33%.
Our January 2012 GGR forecast is MOP28 to 29bn - We are forecasting average GGR of MOP1.6bn per day during the seven-day CNY period, for a total of MOP11.2bn (US$1.4bn). This compares to the peak daily GGR of MOP1.48bn recorded on the sixth day of CNY last year. Based on the recent run-rate, we estimate daily GGR during a non-holiday period is about MOP750mm. Assuming a slight discount to this number given the specific focus on visiting Macau during CNY for many customers, we think the non-holiday portion of January is likely to generate between MOP700-725mm in GGR per day, or a total of MOP16.8 to 17.4bn (US$2.1 to 2.2bn). Combined with the CNY period, we are forecasting total January GGR of MOP28.0 to 28.6bn (US$3.5 to 3.6bn).
January 03 2012
December GGR inline with expectations - Macau released December gaming revenue data this afternoon, which was inline with our expectations at MOP 23.6bn (US$2.9bn). This represented a 25% y/y growth rate against a very tough +66% comp. For the full year 2011, GGR totaled MOP 267.9bn (US$33.5bn), or an increase of 42% vs. 2010. To put this year’s GGR and growth rate into perspective, total GGR in Macau will be approximately 5.5x the GGR generated on the Las Vegas Strip, while the rate of growth in Macau will be roughly 10x the rate on the Las Vegas Strip.
We are forecasting 30% GGR growth in 1Q12 - We continue to believe the VIP segment should remain strong through at least the early part of 2012, as our channel checks suggest VIP demand is growing, not shrinking (despite macro China fears) with junkets asking for additional tables at many / most properties. Further, new supply in the form of Sands China’s Cotai Central should be a driver of demand, much as other new properties have driven demand previously (most recently Galaxy Macau). With this in mind, we are forecasting 30% GGR growth in 1Q12 (vs. a +43% comp), driven by what is shaping up to be yet another all-time record month in January 2012. We note that Chinese New Year shifts to January this year vs. February last year. As such, we are expecting growth upwards of 50% in January based of GGR in excess of MOP 27bn (US$3.4bn).
December 05 2011
This is the fourth installment of our report that tracks shares of mass market customers, both by operator and by property. We have compiled many observations from the two primary entry points into Macau, the Outer Harbor Ferry Terminal and the Macau Border Gate, which combined accounted for 78% of total visitation in 2010 (26% at the Ferry Terminal and 52% at the Border Gate). This installment covers the months of October and November, which included observations across multiple day parts and week parts.
We note that our methodology of counting casino shuttle bus passengers slightly undercounts the total share for SJM given that the company’s Oceanus does not run shuttle busses from the Ferry Terminal and that the property is connected by an overhead walkway which allows customers to walk to Oceanus directly. Further, our methodology does not account for such factors as customer spending characteristics upon arrival at their destination casino or the amount of time spent on the property.
By operator - During October and November, Sands China continued to lead the market with a weighted share of customers of 34.3%, followed by SJM Holdings (30.8%), Galaxy Entertainment (19.4%), Wynn Macau (6.0%), MGM China (5.6%), and Melco Crown (4.0%). While these shares are broadly inline with previously reported shares, we note the following changes relative to our August / September survey: Sands China -110 bps, SJM Holdings -10 bps, Galaxy Entertainment +210 bps, Wynn Macau -30 bps, MGM China +50 bps and Melco Crown -90 bps.
By property - Market shares by property are shown in Figure 2 in PDF. The top three shares continued to belong to Venetian Macao (20.3%), the combination of SJM’s Grand Lisboa / Lisboa (16.1%) and Sands Macao (13.9%). Compared to our survey conducted in Aug/Sep, the three properties that picked up the most market share were: Lisboa / Grand Lisboa (+110 bps), Galaxy Macau (+90 bps) and Star World (+80 bps).
November 25 2011
Yesterday, Macau’s Secretary of Economy and Finance, Mr. Francis Tam Pek Yuen, met with the legislative assembly, as a follow-up to the 2012 Policy Address made by the Chief Executive of Macau, Mr. Fernando Chui Sai On, on 15 November 2011. The Policy Address is an annual speech made by the Chief Executive that gives an outline of policies and new initiatives that he wishes the government to implement in the coming year. Following the Chief Executive’s announcement, senior officials from different policy bureaus (e.g. economy, education, healthcare, labor and welfare) will provide further details about their specific plans and initiatives as mentioned in the Chief Executive’s Policy Address. A typical legislative process will then follow with members supporting or opposing the various initiatives set out in the Policy Address.
During yesterday’s meeting with the legislature, the Secretary of Economy and Finance emphasized that the gaming industry should continue to grow steadily in Macau to help stimulate growth in non-gaming areas like MICE, hotel, retail and F&B. He suggested that the government will support the development of the necessary facilities, infrastructure, human resources and local talent to help diversify its economy, and in particular, the MICE industry. The Secretary also mentioned that the administration will increase its transparency in regards to the issuance of work visas for foreigners and shorten the time associated with the required application process. In addition, the administration will continue to monitor the labor market in Macau to ensure recruitment of foreign labor is concentrated only in areas where local supply is well below demand. We note that the current unemployment rate in Macau is just 2.6%.
Policies impacting the gaming industry - As widely expected, the Secretary confirmed that the tax holiday on gaming profits (at a rate of 12%) for the six concessionaries will continue for another five years and that the current tax of 35% applied to gross gaming revenue is unlikely to be changed.
November 07 2011
SJM reported select unaudited 3Q11 results last night. Gaming revenues were HK$19.057bn, up 36% y/y and down 2% sequentially (impacted by new supply in the market). This compared to our expectations of HK$19.303bn in gaming revenue. Adjusted EBITDA was HK$1.651bn (+40% y/y and down 9% sequentially). EBITDA margin was 8.6%, up 20bps y/y but down 70 bps sequentially (due to catch-up related to rental charges which impacted margin by about 150bps). On a US-GAAP basis, EBITDA margin would have been nearly 29.6% (after adjusting for accounting treatment of 3rd party-promoted casinos).
Gaming segment results for 3Q11 are as follows (we note that SJM’s VIP and mass market table games, as well as slot floor growth rates were lower than market averages, which we would attribute to share picked up by Galaxy Macau):
• VIP: Gaming revenues of HK$13.314bn (+42% y/y and -4% sequentially). This compares to market-wide VIP growth of +52% y/y and +7% sequentially. VIP hold at SJM was 2.88%, down just 2bps y/y.
• Mass market tables: Revenues of HK$5.389bn (+25% y/y and +4% sequentially). This compares to market-wide mass market growth of +41% y/y and +10% sequentially.
• Slot machines: Revenues of HK$354mm (+41% y/y and -4% sequentially). This compares to market-wide slot revenue growth of +27% y/y and flat sequentially.
November 03 2011
MGM China’s parent and 51% holder of 2282.HK, MGM Resorts International, reported 3Q11 earnings overnight. This included a snapshot of Macau operations. For MGM China, net revenues of HK$4.85bn (US$623mm), increased 72% y/y but were 7% below our expectations of HK$5.2bn, which we think was largely hold related. Adjusted EBITDA prior to branding fees to the parent co. was HK$1.17bn (US$150mm), which was up 79% y/y and inline with consensus expectations. EBITDA margin was 24%, or slightly below the YTD run-rate (likely due to hold and mix of business). Including the US$11mm in branding fees, EBITDA was HK$1.08bn (US$139mm).
Branding fee essentially paid off for the year - MGM China pays a branding fee of 175bps of net revenues, capped at US$25mm for calendar 2011. On a YTD basis, it has paid about $14mm of a total pro-rated $14.5mm, leaving only $500k yet to be paid in 4Q11. Looking at 2012, the branding fee increases by 20%, to a cap of US$30mm and given that it’s based on a percentage of revenues, we expect the fee to be front-end loaded with most of it paid during 1H12.
Looking ahead - We remain very encouraged about the long-term growth potential for MGM China following an inline quarter that we think was likely impacted by somewhat unlucky VIP hold rate and some mass market softness following the opening of the new mass-market-oriented Galaxy Macau on Cotai. Importantly, MGM China’s VIP volume growth during the quarter well outpaced market growth (+83% vs. market at +52%) with more upside potential in 4Q11 and beyond as additional VIP gaming space comes online towards year-end. In addition, we think the stage is being set to recapture some lost share on the mass market segment with the multi-tiered mass / premium mass reconfigurations already in place and operational, as well as longer-term lift from the continued rollout of its affinity program.
November 01 2011
The government of Macau has indicated that legislation banning slot parlors from operating in residential areas is nearly complete and that they will work with slot parlor operators in regards to the timing of any closures. We believe that only one of MPEL’s nine Mocha Club locations is at risk for closure, the loss of which should be more than made up for by the recent September opening of Mocha Macau Tower. Further, while the new legislation would also ban any new slot parlors from opening in purely residential areas, we believe MPEL may have identified another parcel (separate from the recently opened Macau Tower location) for development of another Mocha Club facility.
Slot parlors regulation in the final stage - The government is now ready to move forward with the slot parlor legislation which will not allow any slot parlors to be located within a residential area, which is generally defined as any location that does not fall within a 500 meter radius of a casino. It would appear that slot parlors located in hotels or commercial buildings would also be exempt from the ban. There are about a dozen slot parlors in operation, nine under MPEL’s Mocha Club brand, and another three under SJM’s (880 HK) flag. We believe the new legislation could lead to the closure of at least one of the slot parlors (MPEL’s Mocha Marina Plaza), while the government has also indicated that it might consider the closure of SJM’s slot parlor at the Canidrome (dog track) if there is enough public support (this represents significantly less than 1% of our 2012E EBITDA forecast for SJM).
November 01 2011
Macau gaming revenue up 42% to MOP 26.9bn (US$3.4bn) in October - Macau released October gaming revenues this afternoon, which were up 42.3% y/y and up 26.4% sequentially, to MOP 26.9bn (US$3.4bn). The comp was +50%. As expected and on the heels of a very strong Golden Week holiday to start the month, GGR of MOP 26.9bn established a new monthly record, besting the previous high of MOP 24.8bn (August) by 8.4%. Further, we believe that poor hold (bad luck on VIP) throughout the month at several large properties likely kept GGR from eclipsing the MOP 27bn mark.
Post-Golden Week daily GGR represented a sequential increase - We estimate that daily GGR in October (ex-Golden Week) stood at MOP 729.6mm (US$91.2mm). This represented a sequential increase of 3% from daily GGR reported in September, suggesting that the market has not softened following the Golden Week holiday period despite certain speculation to the contrary.
YTD +45% and on track for MOP 270bn (US$33.8bn) in 2011 - Through October, GGR has totaled MOP 221.2bn (US$27.7bn), or a monthly average of MOP 22.1bn (US$2.8bn). Over each of the last two years, the fourth quarter has represented approximately 30% of annual GGR and as such we expect a strong finish to the year with GGR approaching MOP 270bn (US$33.8bn) for the whole of 2011. This would represent more than 43% y/y growth as compared to 2010. We believe 2012 GGR will grow at a minimum of 20%, to about MOP 324bn (US$40bn+), and we are biased to the upside.
October 20 2011
3Q11 recap - Galaxy reported unaudited 3Q11 results this afternoon. 3Q11 revenues of HK$13.293bn were up 148% y/y and up 67% sequentially. On a same-store basis, revenues increased 29% y/y and 24% sequentially. EBITDA of HK$1.793bn was up 191% y/y and up 62% sequentially. On a same-store basis, EBITDA was up 33% y/y and up 12% sequentially. Detailed metrics are in Figure 1 in PDF. 3Q11’s reported EBITDA of $1.793bn was above our expectations for $1.6bn.
New estimates - Our new estimates for Galaxy Entertainment are detailed below in Figure 2 in PDF. Our Galaxy Entertainment EBITDA estimate for 2012 is HK$7.5bn (+2% from our previous estimate). This is also 9% higher than current consensus of HK$6.9bn (prior to today’s announced results). We would highlight that our estimate implies a 7.4% market share for Galaxy Macau in 2012 (vs. its fair share of tables of 8.2% post opening of Cotai Central) based on 20% market-wide GGR growth next year. Should market-wide growth slow to only +10% in 2012, our Galaxy Macau revenue estimate would imply that it captures exactly its fair share. Finally, our 2012 EBITDA estimate for Galaxy Macau of nearly $4bn suggests an EBITDA “ROI” of 24% in its first full calendar year of operations.
October 04 2011
Over the first three days of Golden Week (October 1 – 3), we believe that the most common metrics (VIP roll, VIP win, casino foot traffic, mass market table and slot win) were up nicely on a y/y basis and generally into record territory, putting October on pace to be an all-time record in excess of MOP25mm. Over the same period, we note that visitation to Macau appeared to be at record levels, with the Gongbei border gate reporting 420,000 persons, or 140,000 per day (effectively at max daily capacity). Most hotel rooms in market have been booked weeks in advance (rather than hours or days), again suggesting strength in Golden Week demand. We acknowledge investor concerns largely surround unknowns, especially with respect to the underground banking market in China and overall consumer health in the Mainland. Hence the recent reset of investor expectations for Macau, which we believe imply forthcoming downward revisions to 2012 EBITDA of up to 50% (suggesting y/y EBITDA declines of 20%+). However, all of our channel checks suggest otherwise: continued strength in the VIP and mass markets. Junket operators are not requesting less capital and they are repaying casino operators inline with timing seen YTD which is keeping the YTD velocity of capital intact. If anything, junkets are indicating increased demand at the high-end of the market, which should carry through the end of the calendar year.
September 26 2011
Following yet another week of declines for shares of the Macau gaming concessionaires, herein we take a look at what current prices are telling us from a valuation perspective. As a group, the six pure-play Macau gaming stocks have declined 30% from the beginning of September and are down 37% from their late July / early August peaks. Despite this we do not think shares were overpriced prior to the sell off when considering the explosive growth seen again this year and when considering likely future growth (consensus same-store EBITDA +16% in 2012). Our analysis suggests that at current prices, investors believe 2012 EBITDA estimates are generally between 10% and 40% too high. Current pricing also implies not just a slowdown in growth in 2012, but rather notable declines in revenues and EBITDA on a year-over-year basis. We continue to have a positive outlook on the Macau gaming market and believe shares are significantly under-valued at current levels – even if a downturn were to occur next year. Quite simply, we believe that any negative estimate revisions, as unlikely as that is in our opinion, are likely to be lower than current valuation would imply.
September 01 2011
Macau gaming revenue up 57% to MOP24.8bn (US$3.1bn) in August - Macau released August gaming revenues this afternoon, which were up 57.0% y/y and up 2.3% sequentially, to MOP 24.8bn (US$3.1bn). The comp was +40%. As expected, August revenues not only established a new monthly record, but the y/y increase was the highest level seen in 2011. Further, gaming revenue growth rates have been at their highest levels of 2011 over the past three months suggested that growth is accelerating into the back half of 2011.
YTD +47%; rocketing past US$40bn in 2012 - Through August, GGR has totaled MOP 173.1bn (US$21.6bn), or a monthly average of MOP 21.6bn (US$2.7bn). Given current market strength, the addition of new supply (Galaxy Macau) that is growing the market, as well as typical seasonal trends (stronger 2H relative to 1H) and accelerating growth over the past three months, we are forecasting an average of MOP 24bn (US$3.0bn) per month for the balance of the year. This results in overall growth of 43% in 2011, to MOP 269bn (US$33.6bn). We believe 2012 GGR will grow at a minimum of 20%, to in excess of MOP320bn (US$40bn+), although we are heavily biased to the upside.
August 31 2011
Galaxy Macau reported net revenue and EBITDA of HK$2.384bn and $376mm, respectively over its first 47 days of operations. This would imply a run-rate annual EBITDA of HK$2.9bn. However, we think the property should approach HK$4bn in EBITDA in 2012 based on ramping operations, improving margin, additional junket rooms (3Q11), and ultimate completion of the property (rooms and other non-gaming 4Q11). In the very early days of the property, we estimate Galaxy Macau gaming revenues by segment suggest market shares of 5.8% (mass tables), 7.3% (VIP tables) and 8.1% (slots). This compares to the property’s market wide share of tables (combined VIP and mass) of 8.6% and market wide share of slots of 7.3%. We note that according to our proprietary mass market share tracker, the property is capturing between an 11% and 12% share of mass visitors to Macau, which gives us confidence that the property’s marketing programs are driving high levels of customer traffic and that ultimately greater yield per customer will be driven (dealer efficiencies with greater hands per hour, tweaks to the physical layout, keeping customers on tables longer, etc.), bringing the property’s fair share of revenues closer to / inline with its fair share of gaming positions. Further, management noted mass market revenues have continued to grow on a sequential week-over-week basis over the first seven weeks of operations.
August 23 2011
2Q11 recap - MPEL reported 2Q11 net revenue of $960.0mm (+67% y/y) and above consensus expectations of $925mm. Adjusted EBITDA was $216.3mm (+195%) relative to consensus expectations of $165mm. As noted above, slightly higher hold (good luck) impacted EBITDA by approximately $30mm (~$7mm at CoD and $23mm at Altira).
Altira - Property-level net revenues were up 35% y/y, to $230.6mm, while EBITDA increased 99% y/y to $73.1mm. VIP rolling chip volume was $13.2bn (+39% y/y & +4% sequentially). VIP hold percentage was 3.1%, or above the expected range of 2.7% to 3.0%. VIP revenue of $409mm was up 35% y/y. Mass market drop was $148mm (+93% y/y & +6% sequentially), while hold was at the midpoint of the expected range at 15.8%. Mass market revenue of $23.3mm was up 68% y/y.
City of Dreams - Property-level net revenues were up 97% y/y, to $607.9mm and EBITDA increased 253% y/y to $151.3mm. VIP rolling chip volume increased 58% y/y and was up 3% sequentially, to $19.3bn. VIP hold percentage was 2.8%, or inline with the expected range. VIP revenue was $540mm (+101% y/y, +15% sequentially). Mass market drop was $751mm (+55% y/y, +16% sequentially). Mass market hold was 23.6% and within the expected range of 22% to 25%. Finally, slot revenue increased 30% y/y and 9% sequentially, to $35mm.
Mocha Clubs - Mocha Clubs slot revenues grew 20% y/y to $32.4mm, but were down 4% on a sequential basis. EBITDA of $11.3mm was up 42% y/y and down 11% sequentially.
August 10 2011
SJM reported 2Q11 results tonight. Total revenue was HK$19.527bn, up 40% y/y and up 7% sequentially. Total gaming revenue was HK$19.393bn (also +40% y/y and 7% sequentially). Adjusted EBITDA was HK$1.813bn (+60% y/y and +8% sequentially). EBITDA margin was 9.2% (+70 bps y/y) continuing to reflect various ongoing cost-cutting and efficiency initiatives (despite faster growth of lower-margin VIP segment). On a US-GAAP basis, EBITDA margin would have been nearly 17%.
August 01 2011
Macau gaming revenue up 48% to MOP24.2bn (US$3.0bn) in July - Macau released July gaming revenues this afternoon, which were up 48.4% y/y and up 16.4% sequentially, to MOP 24.2bn (US$3.0bn) or just short of the record MOP 24.3bn recorded in May. The comp was very tough at +70%. This is the second time GGR has eclipsed the US$3.0bn mark. Looking at the calendar, we note that July 2011 had one additional Sunday as compared to July 2010.
Raising our 2011 forecast to +40% (MOP 263bn) - Through July, GGR has totaled MOP 148.3bn (US$18.5bn), or a monthly average of MOP 21.2bn (US$2.6bn). Given current market strength, the addition of new supply that is growing the market (Galaxy Macau), as well as typical seasonal trends (stronger 2H relative to 1H), we are forecasting an average of MOP 23bn (US$2.9bn) per month for the balance of the year. This results in overall growth of 40% in 2011, to MOP 263bn (US$32.8bn). By way of comparison, our forecast of US$32.8bn will likely be 5.5x total Las Vegas Strip gaming revenues of ~6.0bn this year.
July 20 2011
By operator - During the first two weeks of July, Sands China led the market with a weighted share of customers of 34.0%, followed by SJM Holdings (33.3%), Galaxy Entertainment (17.5%), Wynn Macau (6.3%), MGM China (4.9%) and Melco Crown (4.1%).
By property - The top three shares belong to Venetian Macao (21.5%), the combination of SJM’s Grand Lisboa / Lisboa (18.1%) and Sands Macao (12.5%). We would also call attention to Galaxy Macau’s market share, in the number four position at 12.0%. This compares to its share of table games of slightly less than 9%, suggesting that the recently opened property is garnering more than its fair share of customers. This market share is 150bps higher than our estimated market share of customers for Galaxy Macau during the survey covering the last two weeks of June (10.5%).
July 19 2011
Wynn Resorts reported a record quarter in 2Q11, exceeding consensus expectations in both Macau and Las Vegas. Macau EBITDA was $314mm in the quarter (+45.4% vs. $216mm) compared to Street estimate of $296mm. Revenues in Macau were driven by a 51% y/y increase in VIP table drop to $32.7bn, a 26% increase in mass table drop to $690.3mm and a 40.7% increase in slot handle to $1.5bn (slot win +73% to $791). During 2Q11, mass table games benefitted from a higher hold of 27.8% (+580bps versus 22.0% average), while VIP table game revenue hold of 2.89% was inline with market. WYNN management indicated mass market hold in the market is now closer to 26% - 28% (versus prior normalized hold of 21% - 23%). Wynn Las Vegas reported a record quarter for the property with a 22.8% increase in revenues to $391mm and 103.7% growth in EBITDA to $132.7mm (compared to the $115mm peak in 2Q07 w/o Encore and $132mm in 1Q11). Las Vegas results in the quarter were positively impacted by higher than average table hold of 27.6% (+560bps versus 22.0% avg.), which we estimate resulted in approximately $17mm in incremental EBITDA. Using normalized table hold, Las Vegas 2Q11 EBITDA would have increased 76.6% to $115mm. 2Q11 results in Las Vegas were also driven by strong gaming volume (table drop +10.0%, continued strength in room rates (ADR +22.1%) and F&B (+13.0%). In addition, new property leadership catalyzed efficiency, which contributed to a 1,350bps improvement in 2Q11 EBITDA margin to 34.0%. Lastly, WYNN announced a $0.50/share dividend in the quarter payable on August 11, 2011.
July 08 2011
There has been a fair amount of speculation regarding the meaning of a recent visit to Macau of an important Chinese central government official. In mid-June, Minister Wang Guangya, the relatively new Director of the Hong Kong and Macau Affairs Office of the State Council spent two days in Macau meeting with the Chief Executive and various officials, while also inspecting urban infrastructure and community development. This was his first visit to Macau. On a recent trip to Beijing, we participated in a small group meeting with Minister Wang Guangya. As it relates to Macau, the Director is responsible for all affairs of the Special Administrative Region (SAR) on behalf of the Chinese Premier. He is the conduit to China's central government for Macau's Chief Executive, Fernando Chui Sai On. We found the Director's message with respect to Macau to be piercingly clear and direct. With a backdrop of protectionism for Macau's population, his intent is to foster greater economic diversity in Macau, particularly via horizontal means. He will support development and investment that is complimentary to gaming in an effort to make Macau less vulnerable to another financial crisis (global, Asian, Chinese or otherwise). We believe the Director's message tied nicely with China's proposed, 12th 5-year program (2011-2015) which stresses economic development and social improvement, to be adopted in Spring 2011.
July 07 2011
Local Macau media reports MSC casino not approved - Local Macau media is reporting (via Macau’s Secretary of Transport and Public Works) that Macau Studio City’s 2008 land grant did not explicitly include a provision for a casino. While this could technically be true, we do not believe MPEL would have entered into the recently announced MSC transaction without assurances from the Macau government (at the highest levels) that the project would be allowed to move forward with a casino and that table caps would not become an impediment.
We would be buying here -We think shares are being unfairly penalized for what we believe is a nuanced answer by a government official. Recall that MPEL Co-Chairman and CEO Lawrence Ho, at the recent MSC media event, alluded to the land grant issue saying that there were items that needed to be addressed within the land grant, but that the Macau government has given MPEL its blessing and support for the MSC project to include a casino.
MSC transaction details - Melco Crown announced an agreement whereby the company will acquire a 60% equity interest of the entity developing Macau Studio City on Cotai. MPEL is acquiring the stake controlled by eSun Holdings for $260mm, and will ultimately pay New Cotai Holdings $100mm (New Cotai Holdings will retain its 40% interest in the project). We believe that only Silver Point Capital and Oaktree Capital Management will remain in the New Cotai Holdings entity. The $360mm total consideration to be paid by MPEL for a 60% stake suggests a $600mm valuation for the project. Please see our note “Announces majority equity stake in Macau Studio City” from 16 June 2011 for more information.
June 30 2011
By operator - Over the period 10 June through 27 June, Sands China led the market with a weighted share of customers of 37.5%, followed by SJM Holdings (28.4%), Galaxy Entertainment (16.8%), Wynn Macau (6.1%) and Melco Crown (5.0%).
By property - We would call attention to Galaxy Macau’s market share, which has averaged 10.5%. This compares to its share of gaming positions of slightly under 9%, suggesting that the property is garnering more than its fair share of customers. Further, we note that Galaxy Macau’s market share of customers is 14% at the Ferry Terminal (the primary entry point for Hong Kong customers), which indicates to us that the company’s marketing blitz in Hong Kong has been successful in driving traffic to the property (recall that Galaxy Entertainment launched in Hong Kong the largest marketing campaign ever for a new casino in Macau).
June 20 2011
We recently crossed the border into Zhuhai in order to get a better sense for the timing of two significant infrastructure projects that will ultimately benefit mass market visitation to Macau. These projects are 1) the expansion of the Gongbei immigration checkpoint and 2) the construction of the Gongbei terminal station for the Guangzhou – Zhuhai Intercity Mass Rapid Transit (MRT) line.
The physical expansion of the Macau side of the Gongbei / Macau immigration gate was completed in April 2010. This resulted in an increase in the number of immigration counters to 98, from 56 (+75%), while also increasing the number of E-Channels to 80 (self-serve electronic immigration kiosks for certain Chinese and Macau residents). The result of this expansion allows maximum daily capacity of 500,000 persons. Despite this, a bottleneck remains on the Gongbei (Mainland China) side, as its maximum daily capacity is currently 150,000 persons. The expansion of Gongbei is currently underway and upon completion will raise daily capacity to 350,000 (+133% from the current capacity of 150,000).
June 16 2011
This morning Melco Crown announced an agreement whereby the company will acquire a 60% equity interest of the entity developing Macau Studio City on Cotai. MPEL is acquiring the stake controlled by eSun Holdings for $260mm, and will ultimately pay New Cotai Holdings $100mm (New Cotai Holdings will retain its 40% interest in the project). We believe that only Silver Point Capital and Oaktree Capital Management will remain in the New Cotai Holdings entity. The $360mm total consideration to be paid by MPEL for a 60% stake suggests a $600mm valuation for the project.
The stock outperformed its peers in recent weeks as talk of a potential Macau Studio City solution increased, suggesting that the market should like this transaction, especially if the project can ultimately be developed at a reasonable cost (around $2bn or less). This project not only gives MPEL a growth pipeline in Macau, but it positions the company to potentially be the first to open its doors relative to the concessionaires who are still waiting on final Cotai land approvals from the Macau government. LVS / Sands China will open its sites 5/6 beginning in early 2012, which should represent the last new supply coming online over the near term. The issue of the table cap should not be relevant for the Macau Studio City project as the cap will have expired (in 2013) prior to the project opening.
June 01 2011
Macau gaming revenue up 42% to MOP24.3bn (US$3.0bn) in May - Macau released May gaming revenues this afternoon, which were up 42.4% y/y and 18.5% sequentially, to another all-time monthly record of MOP24.3bn (US$3.0bn). This represents the fourth sequential record month and the first time GGR has eclipsed the US$3.0bn mark. May 2011 had one fewer weekend day this year (8 vs. 9), but benefited from the opening of Galaxy Macau mid-month.
YTD run rate suggests 32% growth in 2011 - On a YTD basis, average monthly GGR has totaled MOP20.7bn (US$2.6bn). Extrapolating this run-rate through the balance of the year, would yield total 2011 GGR of MOP248bn (US$31bn), which would represent 32% growth. However, if the rest of the year were inline with the level set in May, total GGR would be MOP273bn (US$34bn), and up 45% on the year.
May 23 2011
Macau visitation up 11% in April - Macau released April visitation data today, noting that visitor arrivals increased 10.7% in April, to 2.3mm persons. The comp was +13.1%. April 2011 enjoyed the benefit of one additional weekend day as compared to 2010 (10 vs. 9). April 2011 also benefited from an early start to the typical May 1 Labor Day holiday, which began this year on April 30. Visitation has grown sequentially (on both an absolute and percentage basis) in each month this year and is up 6.6% on a YTD basis against a +12.4% comp.
SJM & LVS have most mass market exposure, Galaxy up-and-coming - The biggest beneficiaries of mass market growth are SJM and LVS/Sands China. We estimate that in 1Q11, SJM had roughly a 35% share of the mass market (by revenue) and LVS/Sands China a 27% share. We also believe that Galaxy Macau is opening at precisely the right time to capture this mass market strength and what we believe will be continued mass market growth over the short, medium and longer terms driven by the one-two-three punch of wealth generation in China, ease of access to Macau (numerous infrastructure projects) and increased penetration of Chinese consumers.
May 17 2011
SJM 1Q11 recap - SJM reported 1Q11 interim results last night. Gaming revenue increased 43% y/y, to HK$18.141bn. We note that this is aligned with Macau market-wide growth of 42.9% during the first calendar quarter. Adjusted EBITDA was HK$1.678bn (+53% y/y) and above our implied estimate of approximately HK$1.5bn. We believe the primary driver of the upside to our EBITDA expectations came from better-than-expected margins on the strength (and resulting flow-through) of the company’s mass market business. EBITDA margin improved to 9.2% in 1Q11 vs. 8.6% in the prior year quarter and 8.5% in the immediately preceding quarter. On an apples-to-apples basis based on US accounting standards, and including results from 3rd party promoted casinos, SJM’s EBITDA margin would have been a healthy 30.6%.
Raising 2012 estimates - We believe the solid results noted in 1Q11 are accelerating into the second quarter, where we believe May is on pace for another record month of gross gaming revenue market-wide (following records in Feb, Mar and Apr). SJM continues to grow inline with the market as noted with SJM’s 1Q11 GGR growth inline with the market at 43%. Going into 2H11 we are somewhat more cautious given new supply entering the market (Cotai), although we believe this new supply will ultimately grow the market and benefit all six concessionaires. For SJM we are modeling 2H11 to be flat on a sequential basis.
May 04 2011
LVS 1Q11 recap - In our opinion, Las Vegas Sands strong top-line results were overshadowed by low hold in Singapore and Las Vegas properties. In 1Q11, LVS reported total net revenues of $2.11bn (+58.2% versus $1.33bn y/y), EBITDAR (post corporate expense) of $699.9bn and adj. EPS of $0.37. This compares to our estimate of revenues of $2.21bn (vs. $2.14bn Street), EBITDAR (post corporate expense) of $727.4bn (vs. $743.9mm Street) and adj. EPS of $0.44 (vs. $0.44 Street). We estimate low hold in Singapore and Las Vegas impacted 1Q11 EBITDAR by $36mm during the quarter, thus using a normalized hold, EBITDAR (post corporate) would have been approximately $735.8mm. Total company EBITDAR margins increased 750 bps to 35.3% (versus our estimate of 27.8%). The strong EBITDAR margin improvement can be attributed to the higher margin EBITDAR contribution from Singapore (+48.6% margin) as well as strong margin improvements at LVS’ Macau properties (+570bps combined) and Sands Bethlehem (+800bps), which benefitted from the addition of table games. We would buy the LVS shares on material weakness this morning (-10% in after-market trading), which in our view experienced an unwarranted sell off due to low hold (bad luck) in Las Vegas and Singapore, and an additional delay for completion of sites 5/6 in Macau.
May 03 2011
Macau gaming revenue up 45% to MOP20.5bn (US$2.6bn) in April - Macau released April gaming revenues this afternoon, which were up 44.6% y/y and 2.1% sequentially, to yet another all-time monthly record of MOP20.5bn (US$2.6bn). This represents the third sequential record month and the second time GGR has eclipsed the MOP20bn mark. April 2011 enjoyed the benefit of one additional weekend day as compared to 2010 (10 vs. 9). April 2011 also benefited from an early start to the typical May 1 Labor Day holiday, which began this year on April 30.
We believe mass market growing fastest sequentially, bodes well for opening of Galaxy Macau - Solid YTD visitation trends (+5.2% y/y through March), combined with a notable +12.8% y/y visitation increase over Easter weekend (which would typically be attributable to Hong Kong visitors) dovetail nicely with stronger sequential growth of mass market table (+8.2% sequentially in 1Q11) and slot machine revenues (+13.1% sequentially in 1Q11) vs. VIP tables (+5.2% sequentially in 1Q11). We think the ramping of mass market and slot revenues bodes well for the opening of Galaxy Macau in less than two weeks, which will have a significant mass market focus.
Run-rating +26% for 2011 - Based on MOP19.8bn average monthly GGR on a YTD basis, the run-rate would suggest MOP237bn for the full year 2011 (US$29.6bn) or a 26% y/y increase. Based on a confluence of factors (not the least of which is that the 2nd half of year is usually stronger than the 1st) we believe GGR growth for the year is likely to exceed this rate and could reach 30%+.
April 20 2011
Galaxy 1Q11 recap; shares still attractive - Galaxy Entertainment reported certain unaudited 1Q11 financial metrics this morning. During 1Q11, Group net revenues increased 45% y/y (+8% sequentially) to HK$5.726bn. Group EBITDA was HK$712mm (+71% y/y and +14% sequentially) and was slightly below our estimate of HK$738mm.
StarWorld - At the company’s flagship property, StarWorld, rolling chip volume increased 48% y/y, to HK$151bn (+3% sequentially), and VIP GGR increased 52% y/y (+7% sequentially), to HK$4.4bn. Hold percentage was within the normalized range at 2.9%. Net property-level revenue increased 48% y/y (+8% sequentially), to HK$4.953bn. EBITDA of HK$664mm (+80% y/y and +14% sequentially) was above our expectations of $646mm.
Shares still attractive - Although shares of Galaxy Entertainment have increased 23% since our 10 March 2011 note “Shares undervalued as Galaxy Macau should outperform low expectations,” we still believe shares remain attractive. This is a function of what we think will be better-than-expected results at Galaxy Macau, which opens on Cotai on 15 May 2011, as well as broader market growth in general. To that end, and following the release of detailed 1Q11 market-wide gaming revenue by segment earlier this week, we feel incrementally positive on Galaxy Macau with its mass market focus. We note that on a sequential basis, growth in mass market tables and slot machines (+8.2% and 13.1%, respectively) outpaced VIP tables (+5.2%). We believe that Galaxy Macau is opening at precisely the right time to capture this strength and what we believe will be continued mass market growth over the short, medium and longer terms driven by the one-two punch of wealth generation in China and ease of access to Macau (numerous infrastructure projects).
April 04 2011
Updated draft of Taiwan gaming law released - The Taiwan Ministry of Transportation and Communications (MOTC), which has oversight over the Tourism Bureau, has released an updated set of draft rules that could govern the country’s potential future gaming industry. Although we still believe the best location for the casinos would be near Taipei, it appears that the target area for casinos remains the outlying islands which are underperforming economically. As proposed, at least two licenses would be issued.
Limited impact on Macau - We do not believe expansion of gaming in Taiwan would have a significant impact on Macau over the medium or long-term. 1) Any expansion of gaming is likely several years away (5+ in a quickest-case scenario) when accounting for the legislative /referendum process, the RFP process and typical construction timelines. 2) While more mainland PRC residents are traveling to Taiwan these days under a more relaxed visitation scheme, Beijing is incentivized to direct gaming visitation to Macau rather than Taiwan. 3) Taiwanese visitation to Macau only accounted for 5% of total visitation in 2010 (down from 15% in 2000) and likely accounted for only a low-single-digit percentage of gross gaming revenue last year.
April 03 2011
Following the release of Macau’s March gross gaming revenue (GGR) by the DICJ on Friday and the publication of market shares over the weekend, we are raising our estimates for Galaxy Entertainment’s 1H11 (and our implied estimates for 1Q11). Based on Galaxy’s reported market share of 11.3% during 1Q11, this would imply GGR of MOP6.6bn, and puts the company on pace for north of MOP13bn in 1H11. We note that the 1Q11 market share of 11% is also inline with the company’s market share during 2010. Our new estimates for 1H11 are as follows:
Net revenue of HK$13.2bn (+11% from previous estimate of $11.8bn)
EBITDA of HK$1.49bn (+11% from previous estimate of $1.35bn)
EPS of HK$0.179 (+22% from previous estimate of $0.147)
March 31 2011
Macau gaming revenue up 48% to MOP20.1bn (US$2.5bn) in March - Macau released March gaming revenues this afternoon, which were up 48% y/y and 1% sequentially, to an all-time monthly record of MOP20.1bn (US$2.5bn). This represents the second sequential record month and the first time GGR has eclipsed the MOP20bn mark. Clearly no negative impact was felt as a result of the events in Japan during the month.
Run-rating +24% for 2011 - Based on the MOP19.5bn average monthly GGR during 1Q11, the run-rate would suggest MOP234bn for the full year 2011 (US$29.2bn) or a 24% y/y increase. Based on a confluence of factors we believe GGR growth for the year is likely to exceed this rate and will be towards the higher end of a range of +25% to +30% given that trends in the second half of the year are usually stronger than the first. This would result in GGR of MOP235bn to 245bn (US$29.4bn to $30.6bn) for the year. To put this in perspective, GGR of US$30.6bn in Macau is likely to be more than 5x the amount of GGR on the Las Vegas Strip this year (vs. 4x last year).
March 31 2011
Riding the high-speed rails: a Macau infrastructure update
HSR likely accounts for less than one percent of Macau visitationWe believe HSR is currently responsible for transporting less than one percent of mass market visitors to Macau, although with continued expansions HSR could ultimately open Macau to a much more significant number of Chinese residents. Over the last half year, 52% of mainland visitation to Macau has come from the Guangdong province that is adjacent to Macau and home to the terminus of the HSR line. Given their proximity to Macau, these residents are not users of inbound HSR, nor are residents of other southern provinces that do not have HSR connectivity. However, certain visitors from Hubei and Hunan provinces (accounting for 3% of mainland visitation to Macau) that are in proximity of the HSR line would find it a convenient method of transportation to Macau. On a longer-term basis over the next four to five years, China’s HSR network will be much more robust and would link a significantly higher percentage of Chinese residents to Macau (in conjunction with various light rail networks). We would view the upgrade of the HSR networks to be an important driver of continued mass market visitation growth to Macau given what appears to be an (ingrained) preference for rail travel, as well as a tolerance for longer journeys (relative to air travel) in exchange for saving money on transportation costs. This maxim seems to be true throughout Asia: mass market casino customers might “cheap out” on transportation costs and subject themselves to what westerners would consider to be arduous journeys, but then hit the casino floors firing on all cylinders with per-hand wagers in excess of the cost of the trip.
March 03 2011
Based on the recent reported gaming revenue data in Macau (through Feb) and WYNN’s corresponding market share, we are raising our 1Q11 estimates. We are also upwardly revising our full-year 2011 and 2012 estimates based on general on-going strength in Macau.
During January and February, we estimate Wynn Macau generated ~MOP5.6bn (US$695mm) in gross gaming revenue (GGR), putting the property on pace to reach MOP8.4bn (US$1.0bn) during 1Q11. Based on QTD GGR, we believe that Wynn Macau is holding at least inline with its historical range over the last two years of about 2.9% to 3.0%.
February 18 2011
Local media is reporting that a new all-time record for daily gross gaming revenue was established during the recently finished Chinese New Year period. On 8 February (day six of CNY), GGR reached MOP 1.48bn (US$185mm). This is 11% higher than the previous high of MOP 1.33bn set during last October’s Golden Week holiday. By way of comparison, average daily GGR throughout the entire year 2010 was MOP 516mm and was MOP 480mm in February of last year.
February 11 2011
For most of the last five trading sessions, listed Macau casinos have sold off with an average un-weighted decline of nearly 8%. While quarterly results and company-specific drama has created noise, the group has notably under-performed broader emerging Asian markets which are off low-to-mid single-digits. Galaxy -16%, Wynn Macau -10%, Naga -8%, Sands China -6%, MPEL -4% and SJM -2%.
February 04 2011
Las Vegas Sands reported a spectacular quarter across Singapore and Macau, while Vegas was even encouraging. The company truly over-delivered at Marina Bay Sands while dizzying expectations into the print are driving the LVS shares lower this AM. There is some focus on lower sequential rolling chip volume which we believe is a function of seasonality along with a smaller number of (yet higher value) VIPs. This is structurally different than Macau’s junket manufactured VIP base. Suggesting this is a negative exercise in intellectual dishonesty in our view, which misses the bigger picture, especially sans junkets. We would buy the LVS shares on material weakness this AM (-7%) which on an embedded basis appear to be notably undervaluing Singapore or Las Vegas (or both). The free cash flow story at LVS continues to improve with magnitude that should enable the company to de-lever with greater expediency than most models anticipate. As a read-through from the LVS quarter we’d also be buyers of MGM on Las Vegas improvement as well as Genting Singapore (GENS) into its late February results.
February 01 2011
Macau released January gaming revenues Tuesday, which were up 32%, to MOP18.6bn (US$2.3bn). This level of revenue was roughly inline with our expectations for another near-record month (October and December 2010 were each slightly below MOP19.0bn). The comp was difficult at +62%.
January 20 2011
It is widely known that in 2010, Macau gaming revenues rose 58% to MOP 188.3bn (US$24.2bn). In our opinion, some of the extraordinary gaming growth in 2010 can be explained by a 3.6% appreciation in the Chinese Renminbi (RMB) versus the Hong Kong dollar (HKD). While the percentage change in appreciation appears modest, it is material on an absolute basis. In particular, using spot rates from 2005 (capturing the beginning of FX inflection in China) we calculate ~$3bn in benefit accruing to Macau’s gaming revenues. In particular, if we assume that 53% of Macau’s gaming revenues in 2010 were generated by mainland Chinese, the spread between this value in 2010 and the 2005 value in HKD represents the equivalent of ~US$3bn. Furthermore, China’s RMB appreciation was/is compounded by the 20% increase in overall visitation to Macau from mainland China last year, which represented 13mm people, or an incremental 2.2mm with more purchasing power. Essentially, any appreciation in RMB against the HKD creates buying power for Chinese visiting Macau where HKD and Patacas are used by the VIP and mass markets. Players essentially will have more capital and will be able to absorb losses more easily. Furthermore given political pressure from the U.S. and others, we believe China will continue to allow for its currency to appreciate underscoring additional growth in Macau’s gaming revenues.
January 10 2011
MGM continues to strategically address balance sheet dynamics with a proposed notes offering for its CityCenter JV. This follows capital markets activity in 2010 that has worked well to address maturity, covenant, and liquidity concerns. Today’s action should sufficiently remove overhang related to CityCenter, given perception of necessary new capital from MGM and risk in 2011 covenant tests. MGM announced its CityCenter JV has proposed a $1.1bn private placement offering consisting of $500mm of 5-year and $600mm of 6-year first and second lien notes. The net proceeds from the private placement offering will be used to pay down a portion of its $1.8b in loans currently outstanding under the senior secured credit facility resulting in estimated pro forma debt of $2b at CityCenter. In addition to the private placement, CityCenter received important amendments to its restated credit facility that will also extend the maturity on the existing loans by four years (from 2012 to 2016) and presumably provide for more achievable financial targets or a related reprieve for a period of time. While we suspect that some of the non-relationship creditors may have chosen to use this opportunity to exit positions in the CityCenter credit, we view this combination of a private placement and amendment/restatement of the credit facility as a positive for MGM. Furthermore, the JV capital raise seemingly relieves the partners from an anticipated obligation to inject their own fresh capital into the JV in order to achieve an extension and amendments.
December 02 2010
The Macau government has advised Sands China Limited (SCL) that its application for a land concession for sites 7 and 8 has been denied. Recall that in anticipation of the land grant the company invested approximately US$162mm in site work for its development which was to follow its forthcoming sites 5/6 project which is well underway, and not in any way impacted by this decision. Recently, SJM sent a letter to the government expressing its interest in developing sites 7 and 8.
November 16 2010
Macau’s Secretary of Economy and Finance, Francis Tam reiterated in local media (Macau Business) that government is striving to control gaming industry expansion in order to promote orderly and planned growth. The particular comment of interest was his notion that gaming tables (capped through 2013) should grow at a 3%-5% annual pace.
November 09 2010
On a trip to Beijing last week we participated in a small group meeting with Minister Wang Guangya, new Director of the Hong Kong and Macau Affairs Office of the State Council. The Director is an extremely high ranking Chinese official. As it relates to Macau, the Director is responsible for all affairs of the Special Administrative Region (SAR) on behalf of the Chinese Premier. He is the conduit to China's Central Government for Macau's Chief Executive, Fernando Chui Sai On.
We found the Director's message with respect to Macau to be piercingly clear and direct. With a backdrop of protectionism for Macau's population his intent is to foster greater economic diversity in Macau, particularly via horizontal means. He will support development and investment that is complimentary to gaming in an effort to make Macau less vulnerable to another financial crisis (global, Asian, Chinese or otherwise). We believe the Director's message ties nicely with China's proposed, 12th 5-year program (2011-2015) which stresses economic development and social improvement, to be adopted in Spring 2011.
November 08 2010
SJM reported interim 3Q10 results this morning. Total gaming revenues increased 69%, to HK$13.99bn, which was slightly above our estimate of $13.65bn. Adjusted EBITDA of HK$1.18bn ( 135%) compared to our estimate of $1.11bn, while EPS of HK$0.159 was above our estimate of $0.142.
November 04 2010
On October 12, 2010 in conjunction with the announcement of a common stock offering, MGM pre-announced 3Q10 earnings. On November 3, 2010, MGM reported official 3Q10 numbers and held a conference call.
November 03 2010
WYNN reported 3Q10 net revenues of $1.0bn ( 30.1% y/y), compared to our estimate of $978mm and Street consensus of $993mm. Adjusted EBITDA was $274.5mm ( 38.5%) vs. our estimate of $240mm and the Street at $248mm. Adjusted EPS was $0.39, compared to $0.33 in the prior year quarter and our estimate of $0.43. GAAP EPS in 3Q10 was a loss of $0.27 and included a $64.2mm loss on early retirement of debt.
November 02 2010
MPEL reported 3Q10 net revenue of $727.0mm ( 45.3%) compared to consensus of $629.5mm. Adjusted EBITDA was $136.3mm ( 145.0% vs. $55.6mm in 3Q09) compared to the Street consensus of $100.1mm. Finally, earnings per ADS was $0.03, while the Street was forecasting a loss of $0.01. During the quarter, MPEL benefited from favorable rolling chip hold percentage, thus on a normalized hold basis (2.85%), EBITDA would have been $100mm, in-line with the Street consensus.