Inside Asian Gaming

16 irst quarter gaming revenue growth was in line with recent year to date trends (of around 17% year-on-year) and support- ed by higher tourist arrivals. The growth is driven almost entirely by the mass market (+44%), with only the VIP segment being stable (+3%). Since 2006 looks to be a back- end-loaded year, full year growth may actu- ally exceed our expectations if the recent monthly growth rate continues for the next few months. We are confident that the Las Vegas experience of supply-creates-demand will be repeated in Macau. Bulletin Research New openings after 18 months Aside from February (which was distorted by the shift in Chinese New Year timing), March saw the highest y-o-y growth over the past six months. We think this is because Macau finally saw more casinos opening in 1Q06 af- ter a quiet 18months. During 1Q06, two new casinos (the SJM-run Emperor and Galaxy-run Rio) and a large-scale tourist attraction (SJM’s Fisherman’s Wharf) opened their doors. Table win diluted With two new casinos and expansion at Sands, Macau added 422 tables to a total of 1,650 over the twelve months to the end of 1Q06. With this 34% increase in table supply, average win per table was diluted down 14% to US$10,100 per day.We will not be surprised to see this figure halved over the next two years,given the large coming increase in table supply (4,000 tables in 3 years). Even then, we think it would be around US$4,600/table/day, which is still much higher than the Las Vegas average (US$2,500/table/day). In Macau, the table win discrepancy between the VIP and mass markets is extremely wide.We estimate that 1Q06 VIP tables averaged US$26,300/ table/day, and mass market tables averaged only a fifth of that, i.e. US$5,700/table/day. Mass market dominates1Q06 growth 1Q06 growthwas driven almost entirely by ex- pansion in themassmarket.Massmarket gam- ing revenue was up +44% yoy to US$0.65m, Macau 1Q Trends Deutsche Bank’s Karen Tang looks at Macau’s first quarter gaming results, which point to impressive mass mar- ket growth. A string of new casinos set to open in the second half of 2006 suggest stronger growth ahead while theVIP segment was up only +3%yoy to US$0.9m. Growth in both segments is in line with our full year expectations. Due to faster growth, the mass market segment has gained market share from 34% in 1Q05 to 42% in 1Q06. Slot remained a tiny 3% of total gaming revenue. Win per slot up despite supply jump Macau added 1,450 slot machines to a to- tal of 4,220 in 1Q06, thanks to Mocha Slot expansion, and opening of Tiger Slot at the Macau Tower. Despite the 52% jump in the number of slots over the past twelve months, average slot win per machine still increased 15% y-o-y to US$140 per day. We believe this is because the introduction of new slot machines, such as Stargame’s multi- player baccarat electronic gaming machines, have significantly expanded the market. We expect slot win to remain at this level for the rest of the year. 30,000 20,000 10,000 1Q05 2Q05 3Q05 4Q05 1Q06 2006F 2007F 2008F 11,700 Macau avg VIP market Mass market DB forecast (US$/table/day) 12,200 11,600 10,800 10,100 6,400 4,700 4,600 Table win forecast 80% 60% 40% 20% 0% -20% 2004 2005 1Q06 2006F 2006-08F Cagr Macau avg VIP market Mass market 44% 34% 75% 11% 45% 17% 44% 16% 3% -3% 2% 35% 20% 4% 38% Gaming revenue (yoy change) 1Q05 2Q05 3Q05 4Q05 1Q06 2006F 2007F 2008F Macau average 11,700 12,200 11,600 10,800 10,100 6,400 4,700 4,600 VIP segment 34,500 36,100 31,900 28,100 26,300 17,700 11,700 10,800 Mass market segment 5,300 5,700 6,000 6,100 5,700 3,400 3,200 3,200 Table win (US$ / table / day) F