THE M3: LVS, MGM, AIR TRAFFIC & MORE

The Macau Metro Monitor. November 6th, 2009.


SANDS CHINA REVEALS LOTS destination-macau.com

The numbers released as part of LVS’ draft IPO prospectus filed with the Hong Kong stock exchange show that Sands China Ltd is in “great shape”.  DM gives a few good points from the prospectus.

  • Macau’s gaming market is the biggest and is getting bigger every day
    • Venetian Macau Limited and Sands China Limited dominate the market in terms of earnings
  • LVS is the most diversified of Macau’s concessionaires, therefore it is well-placed for growth
    • There is room for improvement in many areas of the company’s business – MICE, for instance – and in some cases the improvement seems to be underway.  DM asks, “if the company can do US$228 million a quarter with only one piston firing, imagine what it can do when the rest join in
  • Its non-core assets are “incredible”.  Disposing of these could change everything

In terms of the small print, DM flags the following:

  • The line items in the prospectus on risk should be taken very seriously, especially the section about lawsuits against the company.  Some of the cases are more trivial than others but cases regarding the suspension of Lots 5&6 and the CotaiJets concession could meaningfully impact the company
  • Sands China Limited is operating within the domain of the Macau government and a regulatory environment different from anywhere else in the world.
    • The company has invested US$1.7 billion and still has not secured a land concession
    • Regarding the sub-concession agreement signed with Galaxy, the situation could swiftly change for the worse if the Chief Executive were to grant further sub-concessions.

BOWIE DOES MGM PROUD destination-macau.com

Under the leadership of the president of MGM Grand Paradise Ltd, Grant Bowie, MGM Grand Macau has markedly improved its performance over the summer.  EBITDA has gone up sharply, from around US$25 million in Q2 to US$75 million in Q3.  Jim Murren’s comments on the conference call reflect his satisfaction with how the business is developing and, in particular, his satisfaction with Grant Bowie’s impact on operations. 

GAMING REVENUES LEAVE INVESTORS UNMOVED destination-macau.com

Gaming revenues for October came in at MOP12.7 billion, +42% y-o-y and +18% m-o-m.  However, Macau gaming stocks are still below where they were in September.  A strong month was always imminent after the surge of Golden Week.  SJM was surely helped by the celebrations bringing in mainlanders, who love the Lisboa, and the opening of L’Arc in September.  Its marketshare went up from 26% in September to nearly 31% in October, resulting in MOP3.89 billion in revenues.  LVS gained from 20% to 24%, with revenues at MOP3.05 billion.  November shouldn’t be as strong, according to DM, but the traffic in the casinos does not indicate a bad month, either. 

FLIGHT NUMBERS DROP DURING SEPTEMBER macaudailytimes.com.mo

The Statistics and Census Service indicated yesterday that commercial flight movements at the Macau International Airport for the first nine months of the year fell by 23% y-o-y to 27,813.  Helicopter flights between Macau and Hong Kong also fell by 9% y-o-y to 11, 679 in the same period, whereas those between Macau and the mainland increased by 20% to 2,454.  In the nine months through September, passenger transport by sea between Macau and Hong Kong rose by 29% y-o-y to 82,341 ferry trips and totaled 15,928 between Macau and Mainland China, up by 2% compared with the first nine months of 2008.

CHINA’S SLEEPY HENGQIN WAKES UP atimes.com

Hengqin island, at three times the size of Macau, could add significantly to the tourist attractions in the region, according to the Asia Times.  LVS expressed interest in investing in a resort complex on the island as early as three years ago; the development potential of the island has long been recognized.  The most recent development proposal envisages a family-orientated leisure and resort center for the southern part of the island, and the new University of Macau campus in the east.

Official projections show Hengqin’s current population of 4,000 growing to 200,000 by 2020 and per capita GDP growing to US$29,000 at that time from US$1,200 today.  Chinese officials have lent their support to the project.  The ambitious plan amounts to a new model designed to bring out the best in Guangdong, Macau, and Hong Kong.  

With economic integration comes geographical integration – talks of allowing visa-free access to Hengqin for visitors from Macau and Hong Kong (and for foreigners) shows the direction of thought officials are assuming in their plans for Hengqin.  Through infrastructure (HK-Macau-Zhuhai bridge) and economic integration, there is no shortage of imagination on how to make full use of the “one country, two systems” policy.