Macau Revenue To Double By 2010?

Written on February 14, 2007 by admin

Wall Street expects Macau casino revenue, which hit $7 billion in 2006, to grow to anywhere from $10 billion to $15 billion in 2010. The Vegas strip of mega-resorts generated $6.69 billion in gambling revenue last year. Las Vegas Sands Corp, will be opening “The Venetian Macao” resort that shares the name of its Vegas casino and will be one of the first examples of a project that duplicates the glitz of the U.S. gambling capital in the only place to allow casinos in China.

The Venetian Macao will be Macau’s first mega-resort, featuring shopping and entertainment attractions that will draw mainland Chinese visitors who now frequent Hong Kong for those pursuits.

Sands is investing $11 billion in a string of casino resorts in a part of Macau dubbed the Cotai Strip. Essentially, Sands aims to reproduce in Macau the Las Vegas Strip of today, complete with the condominiums, shopping malls and entertainment that have blossomed in the last few years.

Sands estimate that some 3 million square feet of malls to be built in Macau would be worth at least $8.4 billion to Sands if it sold out, from as early as 2008. Residential units could fetch another $3 billion to $5 billion, he added.

Macau has had gambling for more than a century but only recently allowed foreigners to invest, sparking a building rush.

In the last five years there has been a dramatic change in Las Vegas, and Sands are taking that change and are bringing Macau from its 1850s to today. If Sands does it right, they’ll actually build the infrastructure, pay for the infrastructure, and end up with cash flow from the ongoing operations for no cost.”

Expecting an earnings boom to follow the Macau buildout, investors have pushed the value of Sands to $33 billion, nearly equal to the combined market capitalization of its two largest U.S. rivals, MGM Mirage and Harrah’s Entertainment Inc.

Sands shares trade at about 55 times projected year-ahead earnings, compared with about 35 for MGM and 24 for Harrah’s.

The company’s existing Macau casino, called the Sands Macao, has done great business since its opening in 2004, but the pace of revenue growth slowed in the fourth quarter and margins fell.

Some analysts have attributed the slowdown to new competition from companies such as Wynn Resorts LLC, which opened its Macau casino last September.

Progress at times has been slow as Sands learned to work in China, they are still awaiting approval from the Chinese government for a planned resort and convention complex on Hengqin Island, off China’s southern coast.

Amid efforts to build its economy, China has not been enforcing a real estate tax of 30 percent to 60 percent, and profits at Sands would be affected if it did.

The Chinese are understandably wary of how brutal Western practices could be, to them we are rapacious capitalists that want to rape, pillage and plunder and drag profit out of everything.

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