Analysts have long expressed concern that Macau government restrictions on non-resident workers on construction projects could result in cost overruns or project delays for Sands China's latest project, the first two phases of which will cost us$2.35 billion to develop.
In an interview with Reuters on Thursday, Sands China's acting CEO, Michael Leven, dismissed the possibility of cost overruns from the project, known as sites five and six. “That will affect the ramp-up of the product and will affect the short-term income situation," Leven said. "But the cost of the product will be the same." "Most of the analysts predicted very little income coming from (sites) 'five and six' in the first three or four months anyway," he added.
When finished, Sands China's new project on Cotai would compete with mega casino projects by Galaxy Entertainment, Melco Crown Entertainment and Wynn Macau, which are all vying for a share of revenues in Macau, the world's largest and fastest-growing gambling market.
Philip Tulk, an RBS analyst, agreed that a delay for the project would not be very significant to Sands China, the world's second-most valuable casino operator after its parent, even though it could affect the firm's credibility, he told Reuters before the interview. But Tulk recently downgraded the stock to a "hold" from a "buy," given his concerns about the project's timing and its potential performance.
Phase one of the half-completed project had previously been due to open in June 2011, but was postponed to the third quarter of 2011. This follows a nearly two-year hiatus as the debt-laden company looked to conserve cash during the financial crisis.
Sands China, which aims to open the Cotai project with 570 tables, has 1,293 workers at its project, Leven said. "We're about half the amount we needed for this particular time," he said, adding that the firm would need 10,700 workers at its peak. "We expect over the next six weeks to get closer to our goals."
Leven, who is also Las Vegas Sands's chief operating officer, had been appointed acting chief executive officer (CEO) in late July, after Sands China terminated the contract of its former CEO, Steve Jacobs, without disclosing a reason.
Leven said the firm is seeking a permanent replacement by the end of the year, adding that it is hunting externally for someone with Asian experience, particularly in China, among other traits. "I think there was an incompatibility of style between Jacobs' personal style and the management of the company, the 71 % shareholder of the company (Sands China)," Leven said, when asked about the reason for Jacobs' departure. “I would think that informing the 71 % shareholder of major activities that are going on in the business is not a relinquishment of independence."
Leven said that Sands China, which had been bringing in more VIP customers through direct relationships, is "anxious to get more junket play than we've been getting," but that would not involve increasing the commission cap paid to junkets - the middlemen who bring wealthy clients to Macau's gambling halls.
By September, the firm could decide on the name of its Cotai project, whose casinos would have Polynesian and Himalayan themes, Leven said.