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Macau Heats Up: Las Vegas Sands Corporation and
MGM Mirage Planning IPO's on Hong Kong Stock Exchange

By Howard Stutz, Las Vegas Review-JournalMcClatchy-Tribune Regional News

Sep. 24, 2009--Macau has once again become the gaming industry's hot ticket.

With two casino operators planning initial public offerings on the Hong Kong Stock Exchange and economic signs becoming positive, JP Morgan gaming analyst Joe Greff said Macau could be the catalyst for a prolonged upswing in the share prices of Las Vegas Sands Corp. and MGM Mirage.

Meanwhile, Wynn Resorts Ltd. Chairman Steve Wynn told media in Hong Kong on Wednesday his company might begin construction on a third Macau resort in the spring, this time on a Cotai Strip site it has controlled since 2005.

Wynn was promoting his company's planned Oct. 9 listing on the Hong Kong Stock Exchange, in which he would sell 25 percent of his Macau holdings, in hopes of raising as much as $1.87 billion.

"We have been at the design of Cotai for seven months, and we believe we have a breakaway completely unique idea that's never been done anywhere before," Wynn said.

Wynn is nearing completion of the $650 million Encore at Wynn Macau, which is expected to open in the spring and will be attached to the Wynn Macau, the company's initial venture into the Chinese gaming market.

According to the company's prospectus for the stock offering, Wynn Macau had 16.4 percent of the Macau gaming market with a daily win per gaming table of more than $15,300, nearly double Macau's average.

Las Vegas Sands Corp., which operates the Sands Macau and Venetian Macau, is also planning a Hong Kong IPO, selling a portion of its Macau gaming holdings.

The company hopes to raise about $2 billion through the offering, which would be used to restart construction on several of its Cotai Strip casinos. Las Vegas Sands halted building of the projects nearly a year ago when it ran into financial trouble in the U.S. and financing for the $12 billion in development dried up.

Wedbush Morgan Securities told investors the Wynn IPO was a better play than the Las Vegas Sands offering. However, the firm thought the stocks of both companies were overpriced based on their current trading levels.

Several signs recently indicated Macau's casino industry may be on the way to an economic recovery.

Mainland China eased some travel restrictions, allowing residents of the Guangdong province to increase the number of trips into Macau, the only place in China where gambling is legal. Also, new caps on VIP commissions have lowered casino operating expenses.

"China should remain one of the faster-growing countries in the next decade," Greff wrote in a note to investors Wednesday. "Macau will continue to benefit from the rapid expansion and increased affluence of the Chinese consumer."

Wynn praised the Chinese government. He told media in Hong Kong "they cooled off the economy when it was time to cool off the economy in Macau."

Macau experienced a gross gaming revenue increase of 46 percent in 2007 and 52 percent in the first eight months of 2008. However, revenue growth began to slow in September 2008. Through June, monthly gaming revenue had dropped 9 percent.

However, Greff thought the positive economic signs would be enough to push Macau gaming revenues up more than 14 percent in 2010.

"With the global economy continuing to recover, we expect the strong trends can continue," Greff said.

He thought the positive economic signs in China would be good news for the MGM Grand Macau, which could deliver "meaningful upside over the near and longer term" to the company.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.

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Copyright (c) 2009, Las Vegas Review-Journal

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