A senior executive of Las Vegas Sands Corp. has denied claims by a self-declared Macau pressure group that LVS is subsidising its Singapore construction project out of revenues earned in Macau.
William Weidner, the President and Chief Operating Officer of LVS, speaking at an event in Macau last week, emphatically rejected the claims.
“All our earnings in Macau have stayed in Macau and were matched five times over by additional investments in Macau,” he stated.
“The suspension of parcels [lots] five and six were a direct outcome of the global credit crisis which has affected the company’s investments not only in Macau, but has also resulted in the suspension of several projects in the United States,” added Mr Weidner.
The explanation doesn’t seem to have impressed the Macau lobbyists, a 50-strong band calling themselves ‘The Concerned Residents Group’. They held a meeting at the Grand Emperor Hotel in Macau last week asking local people to protest at LVS for, in the words of a group spokesman: “having suspended parcels [plots] five and six on the Cotai Strip and given priority to its new casino project in Singapore over Macau.”
“This resulted in the suspension of works in Macau and will eventually create adverse competition between Macau and Singapore. After that more local people will become jobless,” said Ip Kim Fong, who described himself to the local media as coordinator of the group.
Given the opacity of politics and social debate in Macau, it’s difficult to be sure whether the lobbyists are merely independent-minded citizens voicing their concerns, a front for local politicians ticked off with LVS or rival business leaders jealous of the support that LVS has received in the past from the Macau government. Another possibility is the lobby group is an amalgam of all three.
What does seem clear is that the group doesn’t accept Mr Weidner’s assurances and is keen to cause discomfort for LVS in Macau.
Mr Ip suggested the Macau government should, in his words, “review its agreements with the company and take steps to terminate the land and other concessions granted, and also re-tender or sell such land openly in order to protect the economic interests of Macau people”.
He added that a petition was also being prepared for presentation to Edmund Ho, the Macau Chief Executive, and to Macau’s legislative assembly.
Leaving aside the motivations of Messrs ‘Angry of Cotai’, it’s not difficult to see how people might have reached the conclusion that LVS was being cavalier in its commitment to Cotai, and to Macau, even if those critics are mistaken.
In 2007, 78 percent of LVS’s gaming revenues came from Macau. So even if technically LVS is not taking money out of the Macau operation, it’s possible to argue it is using that revenue stream as leverage. That income is potentially a key bargaining chip when it comes to convincing existing shareholders to support retrospectively a new share issue, and to convince the money markets of the long term viability of LVS’s capital intensive expansion programme in Asia and North America.
Political and business culture in China tends to stress the need for foreign investors to submit themselves to local oversight in return for access to China’s huge markets. LVS’s decision to suspend Cotai plots five and six while pressing full steam ahead with construction at Marina Bay Sands in Singapore, may look to Chinese eyes not so much like a rational allocation of resources in a challenging economic climate, but more like a lack of respect to a host community that feels it has bent over backwards to help a foreign investor.
Added to this potentially toxic brew of cultural misunderstanding is a word that has come up quite a lot recently in commentaries on LVS’s current difficulties. That word is ‘hubris’, from the Greek meaning pride or presumption.
It may be pure coincidence that ‘The Concerned Citizens Action Group’ swung into action in Macau only a week after Mr Weidner pointed out to an investors’ forum in the US that Singapore’s low gaming tax rates (10 percent on the mass market gross and 20 percent on the VIP gross) meant that LVS could achieve higher net earnings per dollar in the Lion City than it could in Macau (where gaming tax and local contributions to social projects means an effective tax rate of 40 percent on the gross). Or it could be that in going public with the potential business advantages of Singapore, LVS has shot itself in the foot when it was already limping thanks to the global credit crisis.
In its eagerness to present the good news about Singapore to a rattled investor community LVS may have fallen into a different public relations trap potentially as damaging as analyst scepticism. That trap may be the loss of the support of the Macau business and political class. Watch this space.
