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The Macau Metro Monitor.  October 23rd, 2009


VENETIAN CLOSE TO FINANCING LOT 5&6 destination-macau.com

LAS VEGAS SANDS SEEKS FUNDING TO REVIVE MACAU WORK Bloomberg.com

LVS is close to obtaining US$2 billion in financing that would allow it to finish Lots 5&6.  Sands is willing to contribute additional equity to its hotel and casino project on Macau’s Cotai Strip, on top of the US$1.6 billion it’s already spent.  Leven estimates that the total cost of finishing Lots 5&6 would be about US$3.6 billion and the project should be finished by June 2011.  Commentators have said that junket operators’ ability to lend is strengthening amidst higher real estate prices, which is driving revenue growth in Macau.   

DM agrees with LVS president Mike Leven’s assertion that Lot 5&6 will be a “game-changer” for the company and for Cotai.  Leven said, of the 21,000-room hotel and casino complex on Macau’s Cotai Strip, “We believe it’s the game changer and that’s why we want to finish it… It’s key to our growth in Macau, and it’s key for Macau’s differentiation, to make Cotai a destination” for meetings and conventions.

DM does not believe the Venetian’s line that the additional rooms will cause the MICE (Meetings, Incentive travel, Conferences, and Exhibitions) business to take off; although Lots 5&6 significantly shift the center of gravity from the peninsula out to Cotai, regional neighbors will still maintain the upper hand in the MICE industry.

While the Cotai Strip will certainly gain traction with the opening of Lots 5&6, “downtown” could well hold its own.  First of all, L’Arc has shown the advantage of proximity.  Steve Wynn has apparently mentioned the possibility of hosting street parties in conjunction with his neighbors, drawing on his experience with the downtown area of Las Vegas.  DM also suggests that if Wynn, StarWorld, L’Arc and MGM were joined by a fifth in the now-empty lot (owned by SJM) facing MGM Grand, we would have a real “Macau Strip”.

 

SLOWDOWN IN SINGAPORE destination-macau.com

Marina Bay Sands is going to open way behind schedule, leaving ResortsWorld Sentosa a significant headstart in the Singapore integrated resort race.  Recently in Hong Kong, the Genting-owned group stuck to its prediction of a 1Q09 soft-opening.   Some commentators believe that this gives RWS a market share benefit because local Singaporeans will be obligated to pay entry fees and will be tempted to buy annual passes that lock them in to RWS’ loyalty program.  DM believes that this theory is overblown and that loyalties will take more than a few months for loyalties to be ingrained.  Besides, despite RWS having an advantage, in the end most people will probably go to both. 

DM is skeptical about the earning potential of these resorts.  MBS will not, as many have claimed, earn as much gaming revenue as the Venetian Macao within a year of opening.  Singapore does not have the market Macau has to draw upon.

ONE CENTRAL OPENING UP SOON destination-macau.com

One Central has begun moving people into its apartments.  The retail mall will open in December, and the Mandarin Oriental is still months behind but will, according to sources, be “worth the wait” and the hotel and serviced apartments will exceed the highest of expectations.  While the combination of corporate cultures that was necessary to make this project happen was no doubt difficult, there is a keen sense of anticipation around the opening. 

GALAXY: THE FAVORED ONE? destination-macau.com

While Galaxy Entertainment Group has enjoyed some good fortune over the last 7 years, DM suggests that the treatment it has received from the government has also worked in the company’s favor.  One example is the direction of the traffic flow around the StarWorld Hotel and Casino, which, according to DM is “as favorable as one can get”.  MGM Grand, by contrast, is not so fortunate; visitors to their property have to Take a long detour to arrive at the property’s front entrance.

Galaxy being allowed by the government to transfer its tenancy rights of its land in Macau to a third party while the land is under development has frustrated some of its competitors.  Ambrose Ho, as SJM, and Pansy Ho, partner of MGM have both suggested that this may not be fair. 

COMMISSION CAP DETAILS SETTLED destination-macau.com

The commission cap will start in December and will cover both turnover and revenue-share agreements.  It’s 1.25% on turnover or 44% of revenues that can be paid to a third-party promoter.  No more than 40% can be discounted on the registered rack rate for rooms and F&B.

Interestingly, the Big Six will be required to “report” their credit arrangements with the junkets. No cap will be put on credit lines – yet.

SJM SUCCESSION PLAN: A THEORY destination-macau.com

Uncertainty around the future of SJM, the future of the relationships between the satellite casinos and the company, the future of its majority shareholder, STDM, has been rife in light of Stanley Ho’s recent illness.  DM has faith in the current CEO of SJM Holdings, Ambrose So, to continue to hold it all together.  He has also raised HK$2 billion from capital markets along the way.  While So runs the daily operations, it is unclear who will take over as chairman.  The three oft-mentioned candidates are Pansy Ho, Lawrence Ho and Angela Leong.  Lawrence Ho has expressed his openness to taking over the reins as long as he can take care of his shareholders at the same time, which leads DM to speculate on some sort of merger deal between MPEL and SJM.