The Macau Metro Monitor.  February 5th, 2010.



While no one can dispute that MPEL's January numbers were remarkable, DM cautions extrapolating those numbers for all of 2010 as some have to suggest that MPEL can do $400MM of EBITDA.  DM points out that Altira has had lousy luck for the last 12 months, averaging hold of just 2.64% so assuming that it will hold well at 2.85% for the year maybe a stretch. DM also questions whether the pick up in volumes that Altira saw in January wasn't partly attributable to more credit and faster payment of commissions, which proved unsustainable under the AMA umbrella.  DM also questioned the velocity of the January ramp at CoD in both the Mass and VIP side and the sustainability of such a trajectory. Bottom line, despite the worst of times likely being over for MPEL, its still premature to put a Sands or Wynn multiple on the name.



Ambrose So, CEO of SJM Holdings, responded to the latest market-share numbers for January (MOP14bn, SJM 30%, Sands China 22%, MPEL 16%, Wynn 13%, Galaxy 10%, MGM 9%) by saying SJM intends to increase its share further this year, and given that he's not a soundbite publicity man, DM thinks its likely to happen. DM  points out that SJM's valuation is ridiculously low compared to its peers in Macau (roughly 6 x forecast EBITDA vs. 12x for Sands) and that perhaps in a post Stanley Ho era, the company will need to do more marketing.


Three weights need to be lifted before SJM stock can perform: clarity on the health of Stanley Ho (which DM thinks will be resolved shortly), reporting transparency and liquidity in the shares.  The latter should be resolved fairly soon by the conversion of HK$2BN convertible notes. While the transparency issue may need the most work, Ambrose So's recent media comments may be a precursor or change to come. Reporting quarter numbers and giving guidance could do a lot for the stock, since shareholders don't know how much of the top line growth reported monthly is dropping down to the bottom line.  So has reason to be confident of market share expansion as the escalator being built outside the ferry terminal to take people to the bridge to Oceanus will help a little, but the commission caps in place margins should dramatically improve.



Grando Waldo, owned by Get Nice (0060.HK), reopened last Sunday with a new and improved casino and plans where announced to revamp the rest of the property. Grand Waldo, which operates under the Galaxy concession, was closed last year when Get Nice bought 50% of share of the property and shut it down for a major revamp.  Get Nice will invest between HK$100MM - $150MM with a target completion in 2Q2011, in time for Galaxy Mega Resort opening accross the road. 

The casino has been moved across from the main hall, which will now be turned into an outlet mall targeting thrifty mainland shoppers, the "family" spa is being rejuvenated, and the nightclubs are being redesigned.

PAC ON BACK ON TRACK Destination Macau

This week the government confirmed that the Pac On Ferry Terminal has been completely redesigned and will only open in 2012. Construction at the terminal is proceeding at a cracking pace. More berths are being built and new routes are already opening up. Turbojet now sails to the terminal from the Hong Kong airport (although still at long intervals between sailings), CKS has been approved to run a service into it from neighboring Jiangmen (CKS already runs the Xunlong ferry into Cotai from Shenzhen), while CotaiJet has been cleared to run sailings to Kowloon in Hong Kong (beginning this weekend) and eventually to the Hong Kong airport. This is good news for Cotai, as the new terminal couldn't come fast enough nearly 8,000 rooms coming online from Sites 5 & 6 and Galaxy Macau resort by 3Q2011.


A local academic was quoted by the Oumun Yatbo (Macao Daily) today as saying Singapore could take as much as 6-7% Macau's gaming market by luring away high-rollers.  This is how the academic made his calculation: 20% of Macau's VIP revenues are accounted for by direct, or “premium” VIP players; VIP players account for 2/3rds of Macau's gaming revenues, therefore, 50% of this traffic could end up going to Singapore. DM thinks there is no way that MBS and RW will take anywhere close to 6-7% of Macau's gaming revenues as rebates don't matter to high rollers and Singapore is a 4 hour flight from Guandong, where most of Macau's high rollers originate from. DM does think that RW will cannibalize Genting's existing business Malaysia as well as create new southeast Asian business.



Macau's crime rate dropped by 10.5% in 2009, including a significant reduction in violent crime, juvenile delinquency, robbery and arson.


Following comments by Secretary for Economy and Finance, Francis Tam Pak Yuen, that “imported labour will only be accepted if local hiring does not work out,”  Steve Jacobs, chief executive officer of Sands China, has given an assurance that the company will hire local workers first to restart its Cotai Strip projects.  However, importing labour will be inevitable because the local labour pool cannot meet market demands. Jacobs also stated that Tam assured Sands China that the completion of its Cotai Strip projects would not be jeopardised by imported labour quotas.  The government has not yet allowed Sands to import labour for construction of Sites 5 & 6.




East Asia Satellite Television, a non-wholly owned subsidiary of eSun Holdings, has filed a statement of claim with the High Court in Hong Kong against its partners in the Macau Studio City project in Cotai. East Asia is suing New Cotai, Silver Point Capital, Oaktree Capital Management and others for failure to co-operate and progress the Macau Studio City project.
The company is seeking compensation of HK$689MM for “breaches, or inducing breaches, of contract” and by way of “derivative action”, damages of approximately HK$18.6BN “for inducing or procuring breaches of fiduciary duties owed to the joint venture company”.  According to a HKSE statement yesterday: “The proceedings are being pursued in the context of a desire on the part of the company [eSun Holdings] to protect East Asia’s interests in the development and progress the Macao Studio City project.”

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