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Raising the Stakes in Macau

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There doesn't seem to be any end in sight to the growth of gambling in Macau. The possibilities seem almost too big to fathom. Are we headed for $10 billion per month or even $20 billion per month?

In February, gaming revenue jumped 47.7% to $2.5 billion, faster than the 33.2% growth in January. That may be a little slower than 2010, but that's still an incredible number for growth in gambling. To put last month and 2010 growth in perspective, there were only four months in 2010 when growth was lower than 47.7%. But I'll take 47.7% growth any day.

The great thing for casino operators now is that casino construction is slowing but gambling revenues are still rising rapidly. That means more profits in the pockets of investors and may give operators the ability to pay down debt.

Fighting harder for a bigger pie
It's also interesting to see an apparently intensified fight for gaming dollars in Macau. Wynn Resorts (Nasdaq: WYNN  ) said recently that competitors were increasing their incentives to junket operators in order to attract VIP customers. Normally I would think that revenue rising faster than competition would lead to less of a fight for customers, but in Macau, VIPs and junkets rule the world and casinos want as many VIPs as possible.

If Wynn is right, that's a mixed signal for competitors. Melco Crown (Nasdaq: MPEL  ) , Las Vegas Sands (NYSE: LVS  ) , and MGM Resorts (NYSE: MGM  ) may be in for higher revenue but may have to trade down to otherwise lower margins as a result. We'll see how it shakes out after first-quarter results, but unless incentives get way out of hand, this looks like another blowout quarter across the board.

Macau or Singapore? That is the question
The growth numbers in Macau bring up an interesting battle emerging to see who will grow faster: Macau or Singapore? Earlier this year, CLSA increased Macau revenue growth expectations to 30%, and some experts are expecting 25% growth in Singapore. Macau is off to a great start, but the comparisons get a lot tougher as the year goes on, so Singapore may have a chance in this fight. Which city's gambling revenue will grow faster in 2011?

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Fool contributor Travis Hoium is short Melco Crown put options. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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Read/Post Comments (6) | Recommend This Article (3)

Comments from our Foolish Readers

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  • Report this Comment On March 08, 2011, at 8:27 PM, spokanimal wrote:

    The silver lining for Las Vegas Sands is that they are the only gaming company that operates in both Singapore and Macau and those 2 geographies constitute almost 88% of the company's revenues.

    In both Macau and Singapore, new "supply" of gaming is severely restricted. In Singapore, it's restricted to being a "duopoly" for another 10 years and as un-used gaming tables fill up, overhead absorption will allow profit growth to surge past the 25% revenue growth you speak of.

    In Macau, the only new resort will be Galaxy Macau in 2011. Similarly, in 2012, the only new resort will be Cotai sites 5 & 6... a massive new resort owned by, you guessed it, Las Vegas Sands.

    Beyond 2012, no other resort will come online before 2014, which means very high margins if revenue growth in the SAR continues at this blistering pace.


  • Report this Comment On March 08, 2011, at 11:01 PM, Pkylie wrote:

    Macau's growth can and will be choked off to a trickle once China decides how to conquer the money laundering through Macau by mainland chinese.

    When it comes to Money Laundering, No one does it better than Las Vegas Sands, whether it is dirty money or criminal money as in the case of the world's biggest drug trafficker, Zhenli Ye.

    LVS's tenure in Macau will be short lived due to Adelson's continuing lawlessness. Most pundits believe Adelson will Not be granted a gaming license renewal once it expires.

    With Galaxy casino situated next to Venetian Macau, due to open, it will decimate Venetian Macau's business. Galaxy will also grab all the gaming tables available until 2013, meaning LVS's site 5 & 6 will have NO new tables available .

  • Report this Comment On March 09, 2011, at 11:22 AM, spokanimal wrote:

    Hopefully, it's obvious to all that Pkylie is a master at making things up.

    He cannot offer evidence that China will restrict entrance to Macau any time soon.

    He cannot offer evidence that Sands is involved in money laundering.

    He cannot offer evidence of credible pundits who have stated they believe Sands will not be granted a license renewal

    He cannot offer evidence that Galaxy will receive all pending table allotments and Sands sites 5 and 6 will receive none.

    There will not be a comment following this one that will offer up any evidence of my points above.


  • Report this Comment On March 09, 2011, at 12:39 PM, Pkylie wrote:

    spokanimal suffers from a truth deficit.

    Sands is the master of Money laundering. If you access the court transcripts in "Zhenli Ye" drug trafficking case, It stated clearly Sands provided private jets to ferry Zhenli Ye and his drug cash hoard to Venetian vegas to gamble away $125 Mil worth of drug money.

    Every Macanese will tell you Sands days in Macau are numbered, meaning Adelson is "persona non grata" in Macau.

    If you look at the quota of gaming tables available until 2013, less than 600 tables are still available. Galaxy has said it will Open in weeks with at least 500 gaming tables. Now, i trust you have elementary arithmetic knowledge to do simple subtraction.

    If you read the "Suen " case court transcripts, Adelson told his brother Lenny will be fabulously wealthy once he gets a Macau license. Lenny was the one who introduced "Suen" to Adelson.

    Adelson went on to CHEAT Suen and Lenny.

    Adelson also cheated his sons gary and mitchell out of their due compensation from Adelson's Comdex expo sale to Softbank, if you bother to read the Newyorker writeup on Adelson.

    spokanimal, you are a shameless pumper with no understanding or tolerance for the truth.

    have i said enough ?

  • Report this Comment On March 09, 2011, at 1:19 PM, spokanimal wrote:

    @ Pkylie,

    No, you provided nothing... not a single link to support your words.

    I've followed every issue you raise and have found each one to be contrary to what you're saying.

    Feel free to have the last word but it will be only that...

    ... your word.


  • Report this Comment On March 09, 2011, at 10:05 PM, Pkylie wrote:

    So spokanimal, i m supposed to do your due diligence for you ? You have access to Lexis-Nexis, dont you ?

    Just a simple search on the web produced this. Question is , can you handle the truth, shameless pumper ?

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