MACAU UPDATE FROM THE GROUND

Two nuggets from our sources stationed in Macau:

1. The Macau Government seems to be serious regarding a potential 5,000 table cap per license. They may have already set up an investigative committee to look at the cap. If implemented I think there would be some sort of grandfathering for already permitted developments. A cap would obviously result in a pretty big boost to same store revenues.
2. It appears that traffic at the Venetian Macau has actually picked up recently despite the new Visa restrictions. Assuming it translates into volume this would be a pretty nice boost given the lower than expected market share and margins at the property thus far.
I’m still not quite ready to jump on the Macau bandwagon just yet. Overall mass market traffic growth will slow due to the Visa restrictions and I’m not sure the Junket rate cap will hold. Also, putting a 14x terminal multiple on Macau EBITDA, as some analysts do, seems a bit excessive. However, there are a number of positive catalysts that could make these stocks interesting from a long perspective again including the table cap and a potential tax rate reduction in advance of Singapore opening up (with substantially lower tax rates.)

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