as Vegas Sands Corp., SJM Holdings Ltd. and the four other operators in the only Chinese city where casinos are legal have until October 1 to alter agreements with companies catering to so- called VIP gamblers.
The cap will apply to future and current commissions, Francis Tam, Macau’s secretary for economics and finance, said in the government gazette yesterday.
Macau’s six casino operators, including Melco Crown Entertainment Ltd. and Galaxy Entertainment Group Ltd., lobbied the government to limit the commissions. The casinos pay the agencies a percentage of the amount high rollers spend using non-negotiable chips, which they can’t convert back into cash.
“We expect commission cap at 1.25 % could boost VIP casino operators earnings before interest, taxes, depreciation and amortization by 5 % to 27 %,” Morgan Stanley analysts Praveen K Choudhary and Corey Chan said in a note to clients today.
SJM rose 6.4 % to us$ 0.61 in Hong Kong trading today, boosting its 2009 advance to 185 %. Galaxy, controlled by tycoon Lui Che-woo, rose 0.5 % to us$ 0.48 and has more than tripled in market value this year.
Melco International Development Ltd., run by Stanley Ho’s son Lawrence Ho, rose 0.2 % to us$ 0.74. The company, whose market value has more than doubled this year, is Australian billionaire James Packer’s partner in Melco Crown.
Wynn Resorts Ltd. and MGM Mirage’s venture with Stanley Ho’s daughter Pansy Ho are the two other operators in Macau. Amax Holdings Ltd., Macau’s biggest junket operator, was paid a commission of 1.33 % before the reduction, Angela Wong, the company’s vice president for investor relations, said in a phone interview today.
The commission cap may boost Galaxy’s earnings before interest, taxes, depreciation and amortization by 27 %, as 73 % of the company’s gambling revenue comes from high rollers, the Morgan Stanley analysts said.
SJM’s earnings on that basis may gain 16 %, Melco Crown’s 8 %, Las Vegas Sands’ 6 % and MGM’s 5 %, they wrote. Stanley Ho, the billionaire who controls SJM, the Macau operator with the biggest market share, said July 28 that the commissions were too high and should be limited to 1.25 %. The casino operators earlier this year set up a coalition and pledged to work together as gambling revenue declined.
Stanley Ho is at Hong Kong’s Adventist Hospital. Little information has been available on his condition since the hospital said August 4 that he was admitted. His is recovering without problems, Ming Pao newspaper reported September 19.