Hedgeye - MACAU: ON FURTHER REVIEW

Higher hold contributed over 10% of the 42% YoY growth. November GGR should fall significantly MoM.

As previously disclosed, October gross gaming revenues (GGR) increased 42% YoY to $3.35BN. With the detail in hand, we can confirm that while growth was strong, the month got a boost from good hold and an easy hold comparison from last October. Total direct play this month was 6.3% of the market, compared to 7.5% last year. The total market held at 3.05% vs. 2.70% in October 2010. Normalizing for hold, October would have increased 30% YoY. High margin Mass business increased 36%, just slightly lower than the 40-41% growth we’ve seen during the last 4 months.

As we approach the next 3 months of the year we expect YoY growth rates to decelerate, partly due to difficult hold comparisons and trends we are seeing in our sequential monthly projections (see “MACAU: EYE ON NOVEMBER” published on 11/2/11). Hold rates for November 2010 through January 2011 ranged between 3.05% and 3.13%. Normal hold levels would alone shave roughly 10% off YoY growth.

Y-o-Y Table Revenue Observations

Total table revenues grew 43% YoY this month, on top of 50% growth last October. October Mass revs rose 36%; VIP revs grew 45%; and Junket RC rose 30%.

LVS

Table revenues grew 5% only YoY – exhibiting the slowest concessionaire growth in the market, in-line with recent trends. We’ll be keenly watching for a turnaround in November since we’ve heard that LVS has been extending additional junket credit and 2 new junkets are coming online at the Four Seasons this month. Over the last 5 months LVS’s table revenues have grown at 14% while the market has grown 48% - roughly 30% of the market’s pace.

Sands was down 6% YoY, driven by low hold. The YoY decline was driven by a 15% drop in VIP which was somewhat offset by 12% increase in Mass.

Junket RC was up 21%
Sands held poorly in October and had a difficult YoY comp. Adjusted for 14% direct play (15% in 3Q11), hold was about 2.05%, compared with 3.00% hold in October 2010 assuming 15% direct play (in-line with 4Q10).

Venetian was up 8% YoY, driven by a Mass increase of 28% offset by a 4% drop VIP

Junket VIP RC fell slightly, down 1%
Assuming 23% direct play in the quarter (just slightly below the 24% we saw in 3Q11), hold was 2.99% compared to 3.12% hold in October 2010 assuming 19% direct play (in-line with 4Q10)

Four Seasons grew 17%YoY, driven by an 89% increase in Mass VIP revenues and a small 3% increase in VIP revenue.

Junket VIP RC increased 10% YoY
While we believe that the property held low, the comparison was also very easy. Assuming 36% direct play (which is close to the 38% in 3Q11 and implies a 19% sequential increase in average monthly direct play levels), hold was 2.65% in October, compared with a hold rate of 1.82% if we assume 54% direct play in October 2010 (in-line with 4Q10)

WYNN

Wynn table revenues were up 36%, which benefited from an easy hold comparison

Mass was up 23% and VIP increased 40%
Junket RC increased 11%
Assuming 10% of total VIP play was direct (in-line with 3Q11), we estimate that hold was 2.9% compared to 2.3% last year (assuming 11% direct play – in-line with 4Q10)

MPEL

Table revenues grew 49% - equally driven by Mass and VIP

Altira revenues rose 28% with Mass growth at 18% while VIP grew 29%, helped by an easy hold comparison

VIP RC increased 14%
We estimate that hold was 2.9% vs. 2.7% last year (direct play is not material at Altira)

CoD table revenue was up 62%, driven by 57% growth in Mass and 64% growth in VIP – helped by high hold and an easy comparison

Junket VIP RC grew 37%
Assuming a 13% direct play level, hold was 3.4% in October compared to 2.6% last year

SJM

Revs grew 15%

Mass was up 17% and VIP was up 14%
Junket RC was up 10%

Galaxy

Table revenues continued its streak of triple-digit gains, +201%; mass soared 340%, while VIP gained 186%

StarWorld table revenues grew 64% - exhibiting the best growth of any mature property

Mass grew 56% and VIP grew 65%, helped by high hold and an easy comp
Junket RC grew 28%
Hold was high at 3.1% compared to just 2.5% hold last October

Galaxy Macau's total table revenues were $339MM, 41% higher than September’s

Mass table revenues rose 29% MoM to $59MM
VIP table revenue of $280MM, a 43% MoM increase, helped by luck. Hold was 3.4% this month vs. 2.8% in September.
RC volume of $8.3BN, up 19% MoM

MGM

Table revenue increased 50% YoY, helped by high hold in the quarter

Mass revenue growth was 9%, while VIP grew 60%
Junket RC increased 24%
Assuming a direct play level of 8%, we estimate that hold was 3.6% this month vs. 3.0% in October 2010, also assuming direct play of 8%

Sequential Market Share (property specific details are for table share while company-wide statistics are calculated on total GGR, including slots)

LVS

Share increased 40bps sequentially to 14.1%. This compares to 6 month trailing market share of 15.1% and 2010 average share of 19.5%

Sands' share ticked up 10bps to 3.5% off of all time lows in September

Mass rev share fell 30 bps offset by a 50bps improvement in VIP share

Venetian’s share fell 40bps sequentially to 8.1% share

VIP share fell 1% to 5.9%, below the prior TTM average of 6.8%
Mass share gained 1.5% sequentially to 15.5% - above the 14% average for the trailing 6 months
Junket RC fell 20bps to 4.7%

FS share improved 80bps to 2.0%

VIP share increased 1% to 1.9%
Mass share ticked down 10bps to 2.3%
Junket RC improved 20bps to 1.5%

WYNN

After hitting an all-time low in September market share, WYNN was the largest share gainer in October – gaining back 1.6% to 13.1% share - although still below their 6 month trailing average share of 14.2% and 2010 average share of 15%. Wynn’s share should continue to struggle with the opening of Sands Cotai Central in March and with the introduction of new junkets at the Four Seasons this month.

Mass market share fell 20bps at 10.3%
VIP market share increased 2.2% to 13.6%
Junket RC share was flat MoM at 13.5%, below its 6 month trailing average of 14.7% and 2010 average of 15.2%

MPEL

Market share fell 1.5% points to 14.7%, below than its average 6 month trailing share of 15.2% but above its 2010 share of 14.6%.

Altira share fell 50bps to 4.7%, compared to a 5.6% average share in 2010; Mass share fell 10bps while VIP share dropped 1%.
CoD’s share dropped 80bps to 9.9% driven by share losses in VIP that were partly offset by strength in Mass

Mass market share increased 1.1% points to 9.1%
VIP share fell 1.5% points bps to 10.1%

SJM

In a reversal from last month SJM lost the most share in October, down 3.0% to 26.0%, their lowest share since August 2009 and below its 6-month trailing average of 29.2% and 2010 average of 31.3%.

Mass market share dropped 2.8% to 33.9% - an all-time low
VIP share fell 2.8% to 24.5%
Junket RC share ticked down 10bps to 28.3% - their lowest share since Sept 2009

Galaxy

Gained 1.3% share to 20.9%. October share compares with an average share of 10.9% in 2010 and a 6 month trailing average of 16.0%.

Galaxy Macau share gained 1% to 10.5%

Mass and VIP market share gained 90bps to 8.2% and 11.2%, respectively
RC share ticked down 20bps to 10.8%

Starworld lost 40bps of market share to 9.2%, 10bps above its TTM share of 9.1% pre-Galaxy Macau level.

MGM

Gained 1.1% to 11.2% due to an improvement in VIP share. October share compares with an average share of 10.3% in 2010 and a 6 month trailing average of 10.4%.

Mass share lost 120bps to 6.9% but was more than offset by a 160bps decrease in VIP share to 12.2%
Junket RC gained 60bps to 10.3%, above the property’s 2010 average of 8.4% and in-line with its 6 month trailing average of 10.4%

Slot Revenue

Slot revenue grew 18% YoY and increased $2MM sequentially.

As expected, Galaxy slot revenues grew the most with 309% YoY to a record of $16MM
MGM slot revenues had the second best growth at 24% YoY to $20MM – an all-time high for the property
Wynn slot revenues grew 11% YoY to $25MM
MPEL slot revenues grew 3% YoY to $22MM
SJM slot revenues grew 7% YoY to $14MM – down from $17MM in September
LVS slot revenues fell 3% YoY to $33MM