From a quick trip to Macau
Overall
- No softness yet but some concessionaires are definitely more conservative on the near term VIP outlook
- Part of that is the hold comparisons which are difficult through January
- Consensus is that there are no real structural problems with credit and junkets but the collapse of a smaller junket is possible which would spook the market but not really impact the overall business
- LVS may spark a junket war in Macau
Wynn
- Mass business still strong - we think they may be up 30% YoY November MTD
- VIP business is slow for them
- Venetian/Four Seasons already very aggressive on junket volume discounts and commission advancement – this will impact Wynn
- For now Wynn is staying put on the junket credit side and commission levels
- Wynn is in a little bit of a pickle because if they still don’t want to sacrifice margin they are likely to continue losing VIP share
SJM
- More defensive should VIP go under pressure
- Upside in Mass is also limited due to lack of hotel rooms
- SJM could pay HK$1 annual dividend (8% yield) and still fund Cotai
MPEL
- Holding could be as low as 2.5% November MTD
- We think they are still well over US$100 million in EBITDA midway through Q3 despite the bad hold
- Worried about Venetian/Four Seasons junket aggression. Deciding whether to match or hold steady. This is their number one concern.
- US$200 million quarterly EBITDA run rate even with the low hold and potential margin compression from increasingly competitive environment
- It is my sense that management is more optimistic than US$200 million per quarter next year
- Aside from the junket pressure, there are numerous headcount reduction opportunities next year so margins are still likely to be higher
- Still evaluating an expansion of CoD – retail, new premium Mass space, and new high end suites
- Premium Mass segmentation may insulate them from the opening of 5/6
LVS
- Some concern that the interior of 5/6 will not be “real Chinese” enough
- Connecting walkways will be constructed by the government and not LVS – so all connections will be done at the same time but not in time for the opening
- Neptune opened 2 weeks ago and is doing well
- Neptune could impact November – sounds like Neptune has a pretty sweet deal with incentive triggers at volumes well below market averages
- Already expanded junket commission advancement to 2 months for some junkets