Interesting the amount of money passing through macau casinos has reached record highs,that is good news.
I guess the best advice is to reread this article in a couple of months time and see how accurate was the article, and analysts opinions.
Packer feels the squeeze in Macau
VANDA CARSON January 18, 2010
James Packer's Macau joint venture is under pressure to maintain its share of the world's biggest gambling market, as the hub returns to the double-digit growth not seen since the global financial crisis took hold.
In the six months to December the amount of cash passing through Macau casinos rebounded to the point that it surpassed the record highs of March 2008, when total quarterly revenues peaked at 30 billion patacas ($4 billion).
The market then experienced a slump triggered by China's visa restrictions and the financial crisis.
Revenues in the past three months grew 14 per cent to 36 billion patacas, collected at 34 casinos spread across Macau.
Revenues in the final three months of last year also grew 50 per cent year-on-year, from 24 billion patacas in 2008.
The figures were published last week by Macau's gambling regulator and give a snapshot as to how the local market is faring and how the six concessionaires are competing. In the three months to September Melco Crown Entertainment had 12.5 per cent share of the 32 billion patacas in revenue generated by the former Portuguese colony's casinos.
Investors will have to wait until next month to find out if the company has been able to keep hold of its share amid increasing activity from its competitors and a rapid acceleration in overall market growth.
The publication of the official industry figures comes as analysts raise concerns about Melco Crown's short-term profitability due to changes in the way it deals with junkets operators at its Altira casino.
Two analysts with CLSA, Aaron Fischer and Huei Suen Ng, last week slashed their estimates of fourth-quarter earnings from $US65 million ($70.5 million) to $US6 million, arguing that earnings would be hurt as the company moved to deal directly with junket operators, which will reduce the commission it pays from 1.35 to 1.25 per cent. The pair recommend selling the stock until the casino's operations improve.
On Friday BNP Paribas also cut its price target for Melco Crown from $US7.80 to $US4.45, but retained a buy recommendation. Shares trading on the US Nasdaq closed at $US3.75 on Friday, up 4 per cent.
The casino mogul Stanley Ho's Sociedade de Jogos de Macau (SJM) still dominates the market with 21 casinos, followed by the Hong Kong-listed Galaxy Entertainment with five, Sheldon Adelson's Venetian with three, Melco Crown with two, and Wynn and MGM Grand with one each.
Melco Crown is in fourth position behind SJM with 30 per cent of the market revenue, followed by the US giants Sands and Wynn with 23 per cent and 15 per cent respectively. It is ahead of Galaxy with about 10 per cent and MGM Grand with about 9.5 per cent. Already the market laggard MGM Grand has announced an overhaul to boost its ranking.
Competition is intense, SJM last month making a grab for more mass-market players with its new 260-table Oceanus Casino, and Galaxy opening another $2 billion casino by March.
Melco Crown will have to fight to maintain its share at 12.5 per cent and aggressively offer discounts and commissions if it wants to return to its peak of 19 per cent reached in 2008. Already its flagship City of Dreams casino is giving away prizes to lure more visitors in the first quarter of the year, especially over the peak Chinese new year next month.
The 36 billion patacas recorded in the past three months does not necessarily mean money in the bank for casino operators and does not reveal their profitability because they must pay discounts and commissions to junket operators as well as their costs out of this amount.
The figures may also have been boosted by the improving credit given to high rollers, which had previously been sluggish.
The high-volume, low-margin VIP baccarat trade favoured by high rollers accounted for 69 per cent of gross revenues in the past three months.
The Melco investment is a crucial one for Mr Packer, who was forced to write off his disastrous investments in North America to the tune of $1.7 billion over the past two years and has relied on Macau as the potential saviour of his gambling empire.
''We would hope over time that we could recapture some of that value,'' he told investors in October.
The write-down was offset by a $500 million gain on his Macau investment.
Source: The Sydney Morning Herald
CWN Price at posting:
$7.84 Sentiment: Hold Disclosure: Held
