Inside Asian Gaming

INSIDE ASIAN GAMING | June 2010 26 Market View Caps — What Caps? Macau government claims of controls on table numbers and junket commissions look a little frothy, explains Ben Lee I nvestors and analysts have been burning the telephone hotlines to Macau in the last few months asking two questions: “What will be the effect of the gaming table cap on future revenue growth?” and “Is the junket commission cap (1.25%) in place?” On the first issue, the honest answer should be “who knows?”There are too many variables and questions implicit in that one sentence. Here’s one reading of the numbers. At the end of the first quarter this year, the Gaming Inspection and Coordination Bureau (DICJ), Macau’s gaming regulator, said there were 4,811 tables in the Macau market. It didn’t specify if that was tables merely‘allocated’or active on the floor. In mid-April, Encore at Wynn Macau opened, adding 61 tables to the market. Assuming for amoment the original figure of 4,811 was for currently ‘active’ tables rather than merely ‘allocated’ones, then the Encore opening brought the total number of active tables in themarket to 4,872. By that reading, in order for the market to stay within the 5,500 cap announced by the government in May (due to take effect between now and the end of 2012), that would leave only 628 tables for new openings. And there are two whopping properties due to open before the end of 2012—Galaxy Macau, Galaxy Entertainment Group’s (GEG) flagship resort on Cotai, expected to be ready by the end of the first half of 2011, and part of Sands China’s Cotai five and six. Sources close to GEG say the company is ‘comfortable’ it will get at least 400 tables for Galaxy Macau. That leaves Sands China potentially with only 228 tables with which to populate the first phase of Cotai five and six. Given the current uncertainty over yet another variable—the number of migrant construction workers that Macau will allow in to work on Cotai five and six—the most optimistic scenario on Sands China’s project is that only part of it will be ready by the end of 2012. Given the size of the scheme, however, even a first phase opening should comfortably swallow up 228 tables and still be hungry for more. Michael Leven, President and Chief Operating Officer of parent company Las Vegas Sands Corp, told Inside Asian Gaming recently that if necessary, Sands China will take under-used tables fromelsewhere in its Macau operation to stock Cotai five and six. Confused yet? Macau’s table cap—a summary So for the sake of readers’mental health, here’s a quick recap of some of the basic issues regarding the government’s supposed table ‘cap’. 1. Did the government—in arriving at a maximum table tally of 5,500 in the market between now and the end of 2012—count the actual number of operational tables and classify them as ‘existing’ tables? Or did they just tally up the number of tables that were pre- approved for each property? 2. And if it was the latter, can the operators move tables from one property to another? 3. What about a suggestion (from a senior Macau gaming executive) that SJM’s quota has already been negotiated at 1,700 tables and would not be subject to this restriction? 4. Does the government actually want Cotai lots five and six to be completed? If so, the 530 tables that Galaxy want for their Galaxy Macau project on Cotai plus the 500-600 tables Sands China needs to justify their huge investment on Cotai lots five and six definitely do not come within the number of new tables permitted. 5. Is this table cap issue driven by the