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THE MACAU METRO MONITOR

COMM-CAP IS HERE, WHAT DOES IT MEAN? Destination-macau.com

The commission cap, according to DM, will help the concessionaires become more profitable.  There is a valid fear that side-betting could become more prevalent but overall the cap should result in EBITDA growth for the operators.  While the authorities have made it clear that the cap applies to all forms of compensation, cash and non-cash, it is very difficult to measure the non-cash side of the business let alone police it.

DM sees credit as the most important factor for players; they will go wherever they can get the longest credit line.  Having deep pockets and having good debt-collecting agents could now be more crucial to concessionaires’ profitability than ever.  SJM and Galaxy shot up when the commission cap news emerged this week.  Wynn could benefit from the return of customers previously lost due to more aggressive commissions elsewhere. 

SJM: WHAT’S WITH ANOTHER HK$2BN? Destination-macau.com

SJM has announced its intention to raise HK$2bn from a convertible bond.  With visitation and revenue numbers looking healthy, commission caps coming into place, and the 60th Anniversary of modern China approaching, valuations are being pushed up.  DM speculates that the money will be used either to play the stock market or to fund credit lines for junkets. 

The five-year bond will have a zero coupon and be convertible to SJM stock at a price of HK$2.25 from December 8.  Today’s share price was HK$4.35.

SJM: THE ONLY STOCK TO BUY? Destination-macau.com

DM cites an analyst’s warning that Macau gaming stocks are becoming inflated and becoming a bubble as overcapacity threatens to drive down ROIC and over-excitement about visa-easing and commission caps push share prices up rapidly.  The one stock that is recommended by this commentator is SJM.  The reasons include, dominant market share, superior ROIC, right market-segment focus, improving profitability and a superior balance sheet. The source also claims that SJM is trading at a discount compared to its peers.

WYNN PUTS ON A SHOW Destination-macau.com

Steve Wynn held a press conference during the week prior to Wynn Macau’s IPO on the Hong Kong stock exchange.  When asked if he feared losing direct-VIP clients to the Singapore resorts when they open early next year, his response was that he has Linda Chen and the don’t (fear losing business to Singapore).  DM exalts Wynn and Chen’s track record in the VIP baccarat business and believe they will continue to outperform in that area when Singapore is open. 

Regarding the stock price, some commentators are claiming that once the stock starts trading at HK$10, much of the upside is priced in.

L’ARC OPENS FOR ANGELA Destination-macau.com

L’Arc has had a strong few days since opening.  The mass floor is said to have done quite well. It remains to be seen how the business will far when the SJM new business operations team hand over to the L’Arc team.