illionaire Sheldon Adelson hopes to follow in the footsteps of Wynn Resorts, which earned us$ 1.9 billion from its debut in Hong Kong last week. Wynn Macau's stock has been steadily trading about 7 % higher than its initial price. Wynn's net revenues from Macau for the second quarter of 2009 came to us$ 410.4 million; by comparison, Sands' totaled us$ 726.1 million.
Sooner would be better for Sands, especially given the mercurial nature of revenues in China's gambling haven, where so much depends on how stringent Beijing's visa restrictions are at any given moment.
For the first nine months of this year, before China loosened entrance rules for mainland visitors, Macau's revenues from the gambling industry were significantly lower, according to a September report from Moody's. But strong September numbers and an uptick in revenue from China's Golden Week have built momentum for Macau, and it will behoove Sands to stage its IPO before investor appetite wanes.
Casino winnings for September were 52 % better than that month last year, an October 8 Citigroup report said. "The Macau market is expected to see an improvement in its total gaming revenue in second half 2009, as visa restrictions seem to have eased and visitor arrivals have been increasing," the report said.
Meanwhile, though, Macau's government is mulling how to best contain the industry's unchecked growth. Possible moves include capping the number of gaming tables a casino can operate and raising the minimum age limit from 18 to 21. A recent cap imposed on the commission price casino owners pay agents who lure high-rollers to their tables could also reduce the number of big spenders in Macau.
But analysts and casino owners don't see this possibility as a threat to their revenues - in fact, they view it as a way to prevent against an oversupply glut that is currently hampering the economy in Las Vegas. "If you allow people to spread games without any control then what happens is they get overzealous - as you've seen here in Las Vegas - ... they hire people and fire them," Wynn Resorts CEO and founder Steve Wynn told Reuters in an interview.
In effect, limiting Macau's growth might actually help the companies invested in properties there. "The six operators understand that paying higher commissions and opening more gaming tables than others might win them short-term market share, but is not a sustainable competitive strategy," a Citi report said. "They realize that they have to foster a less hostile environment so that the industry as a whole can be more profitable."
Besides Sands and Wynn, other casino operators in Macau include Galaxy Entertainment Group, SJM Holdings, Melco Crown Entertainment and a casino run through a joint venture between MGM Mirage and Pansy Ho, daughter of Hong Kong casino tycoon Stanley Ho.
Despite optimism about Macau's growth and the prospect of another successful IPO for an American company, Moody's nonetheless recommends investing in the Asian casino operators, who don't have money-losing properties in Las Vegas dragging down their balance sheets.
"In contrast with a still-depressed Las Vegas, sentiment in Macau is on the upswing," Kevin Tsang, assistant vice president and analyst at Moody's, wrote in a report. "A majority of the consolidated revenue and operating profits of both of these U.S.-based gaming issuers now comes from their Macanese operations."