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The Macau Metro Monitor. January 29th, 2010


Large construction projects such as the Zhuhai-Macau-Hong Kong bridge and the light railway, will contribute to Macau's economic growth in 2010 and help drive the unemployment rate to under 3%. “In 2010 the economy is expected to have positive growth, but there is some uncertainty in external terms and a threat of a second flu pandemic,” warned the Macau Monetary Authority's most recent report.


It appears that this week marked the conclusion of the Melco and AMA relationship and that the two parties are going their separate ways. It also seems that Melco has walked away unscathed from the breakup, with RC at Altira remaining healthy with a speculated turnover of MOP 23BN in January. The authorizes sited that the conclusion of agreement between MPEL and AMA came to a logical end as many of the original reasons for putting the deal in place no longer exist:

  • When Altira opened in 2007 they had no marketing plan and AMA did a great job of establishing Altira in the marketplace and was paid a commission for their efforts. Now Melco can take it from here
  • The deal gave Melco cashflow while it focused on building CoD. Now that CoD is open it doesn't make sense for Melco to pay a consolidator to bring customers to one property over the other
  • Melco helped Amax to raise HK$2BN from people on Wall Street in its back-door listing on the HKSE- money which was poured into credit lines for the sub-junkets and thereby guaranteed their business. Furthermore, Melcogave AMA faster-than-normal payment schedules, allowing them to use their credit better. But ultimately, this was all unsustainable. It was a wild, expensive grab for market share that temporarily disrupted the market. It had to unwind, and that was clearly the case over the course of 2009, especially as COD came online.

Now that the agreement is disolved, we'll have to wait and see if Altira can run a successful VIP business on its own. It will also be interesting to see how Lawrence Ho's supposed partner in this deal, Ng Wai, will continue to get compensated for his business . It's unclear whether he will move his junkers back to SJM properties, including his own Greek Mythology since he can no longer get paid 1.35% on the turnover at Altira.

TIME TO BUY MPEL Destination Macau

Gary Pinge from Macquarie is making a buy call on MPEL for 2 reasons: 1) Numbers are looking good due to the marketing zeal of Steve Webster positively affecting Mass and the IM team is holding their own in the VIP business, even at Altira. 2) "the price is right" given the recent hammering in the stock market.  There has also been chatter this week about Harrah's coming to buy out Crown's interest from the JV. The authors of DM dismiss the rumor as "nonsense" as Lawrence Ho doesn't need another foreign partner and has plenty of cash to buy out Packer is he really wants out.


DM dismisses the recent sell-side chatter of Macau's direct VIP business being bound to get hurt by the higher rebates that Singapore can offer players and the RWS has been poaching staff from Macau's International Marketing teams. Below are the rebuffs:

  • No one even knows what the direct VIP vs. junket VIP is exactly, since the government only cares about the entire number and how much taxes it will collect
  • While rebates may matter to junkets, it's unclear that they can even get licensed in Singapore. All high rollers care about is how well they get treated and how much credit they can get. A .2% difference in how many chips a player can buy only equates to one hand at the table
  • The loss of Mabel Lee (formerly at Wynn now at RWS) doesn't even matter. Mabel Lee previously helped Linda Chen at Wynn run the VIP business coming from Southeast Asia.  Channel checks at Wynn denied that Mabel was a significant loss, and in any case its unlikely that the loss of one person would bring down the world's most successful IM team
  • Genting is more likely to be like SJM than LVS. DM is unconvinced that they will be able to successful run a truly integrated resort. 
  • DM questions where the Chinese gamblers are going to come from.  So far RWS has not spent any money marketing in Macau, the largest place where Chinese really gamble.


January numbers are on track to beat MOP13BN, despite bank tightening. This is especially remarkable since Chinese New Years falls in February of this year vs. January of last year. Given the calendar shift, February results are likely to be huge as well. From all the accounts, hotels for CNY are fully booked.