Inside Asian Gaming

INSIDE ASIAN GAMING | December 2008 10 Cover Story 1,300 tables or 30% new supply in 2009E into the market,” says Goldman Sachs. “As with Galaxy,” adds the report,“we believe the key challenges for SJM are its ability to secure the budgeted HK$17 billion capital to complete these projects.” • Wynn and MGM’s Cotai projects have also been removed from Goldman Sachs’ supply forecasts. “Our US analyst believes that the companies are adopting a “wait-and-see” approach. We see several opportunities for them to purchase land in Cotai, with several other projects on hold due to funding issues (e.g., Galaxy’s site of 10 million sqft; eSun’s site for Macao StudioCity etc),” says the investment house. • Closure of certain tables/slots in older casinos. “Of the 31 casinos in Macau, SJM owns 19,” says the report. “As the market continues to undergo consolidation (especially as demand slows), we expect some of the older and small-scale casinos to be closed down. After these revisions, we estimate the number of gaming tables in Macau to increase by 8% CAGR from 4,312 as of 3Q08 to 5,787 as of end-2012E (vs. our previous estimate of 10,153 tables). “We believe slower gaming supply would put less pressure on profitability in the long term. After the fall in 2009E, we expect net win per table in Macau to stablise at that level from 2010E through 2012E,” adds Goldman Sachs. T he analysts go into considerable detail on the impact of the LVS decision on Cotai, with projections based on short, medium or indefinite suspensions of work. “On November 11, LVS announced that it has halted the development of its projects (Sheraton and Shangri-La hotels) due to the current difficult capital market conditions. It had not disclosed an updated schedule or timeline for these two and other projects originally scheduled in 2009-2012 (e.g. Hilton, A longer wait for Shangri-La Stripped Down Cotai Goldman Sachs analyses the potential impact of the LVS construction delay Fairmont, Conrad, Raffles, Holiday Inn/Intercon, St Regis etc). As there is limited visibility as to how LVS would fund these projects and about its focus on Singapore in the next 1-2 years, we have removed its projects from our gaming model,” says the investment house. “Originally, we estimated that these seven casino hotels [Hilton, Fairmont, Conrad, Raffles, Holiday Inn/Intercon, St Regis] would add 2,100 tables, 7,500 slot machines and 16,500 hotel rooms in the Cotai Strip. “We expect 42% less table addition until 2012E and forecast 8% supply CAGR [compound annual growth] from 3Q08 until 2012E. We believe more balanced demand-supply dynamics should put less pressure on operators’ profitability over the long term,” states the report.