Casino revenue to drop this month

Sands China, which operates Venetian casino, has announced it will pay its first ever dividend, saying it has enough cash to fund expansion plans in Macau

Local gaming results grew once again in January but they could plunge significantly in February, for the first time in more than two years, due to the Chinese New Year calendar shift, an analyst has warned.
Cameron McKnight, an analyst at Wells Fargo & Co, expects February revenues to fall as much as 14 percent year-over-year, due to a strong comparison basis. In 2011 the same period received a boost as it included the weeklong Lunar New Year vacation in mainland China.
If that were to happen, it would be the first time the local gaming would face a year-on-year drop since the period between December 2008 and June 2009, when the territory was feeling the pinch from the global financial crisis.
The Wells Fargo analyst also only expects a three percent increase in revenue growth for the month of March.
This year the Chinese New Year was celebrated in January and McKnight expects total revenue of MOP 24.3 billion, an increase of 31 percent year-over-year, according to a research note.
Macau’s gaming revenue will probably increase 8 percent in the first two months of this year from the same period in 2011, slowing from annual growth of 25 percent in December, McKnight added.

‘MGM China is quite likely to pay its first dividend this year too, as the company is in a net cash position’- Philip Tulk

Slower January

The analyst was a bit more optimistic than the forecast released by Portuguese news agency Lusa from industry sources, which predict revenue figures far below market expectations that the Chinese New Year would lead to a new monthly record.
Macau casinos closed January’s books with gross revenue in excess of MOP 23 billion, up by about 25 percent year-on-year, sector sources told Lusa. One operator said he was confident of breaking the MOP 24 billion mark.
This comes despite the month experiencing unusual fluctuations due to the Lunar New Year that saw a dip in casino visitors.
“We experienced an enormous wave of people after Lunar New Year and in terms of revenues that has proven significant,” a source at Sociedade de Jogos told Lusa. “Despite January not being excellent, it is a good start to 2012 and the lunar year of the dragon,” the source added.
Victor Yip, a Hong Kong-based analyst at UOB Kay Hian also expects total gaming revenue to be less robust than earlier estimates of as much as MOP 28 billion. “Through our various channel checks, the revenue is expected to reach roughly MOP 24 billion,” Yip told Bloomberg.
Earlier this month Union Gaming Research said it expected record gaming revenue in January, “in a range of MOP 28 billion to 28.6 billion”.
“This would imply 51 to 56 percent growth as compared to the previous January.”

‘We believe the majority of the gaming operators in our coverage universe will report strong fourth quarter 2011 results’ - Felicia Hendrix

Sands dividend

Local gaming operator Sands China has announced it will pay its first dividend, saying it has enough cash to fund expansion plans in Macau.
The unit of billionaire Sheldon Adelson’s Las Vegas Sands said it will pay an interim dividend of HKD 0.58 per share. The payout will occur on or about February 28, Sands China said in a statement to Hong Kong’s stock exchange.
This figure is smaller than the HK 1.4 dividend predicted by analysts at Union Gaming Research and the HKD 1.2 special dividend rival operator Wynn Macau paid last month. SJM also regularly announces dividends to its shareholders.
“MGM China is quite likely to pay its first dividend this year too, as the company is in a net cash position,” Philip Tulk, head of Asian conglomerates and gaming research at Royal Bank of Scotland, told Bloomberg.
Sands China said it “has determined that it has sufficient reserves, after the payment of this interim dividend, to finance its operations and the expansion of its business, including the development of additional integrated resorts.”
The operator is currently completing the construction of a new resort, Sands Cotai Central, slated to open this spring. Las Vegas Sands will also be the first operator to announce its results for the last quarter of 2011, tomorrow (Macau time).
And the market is expecting very positive results from most gaming operators.
“We believe the majority of the gaming operators in our coverage universe will report strong fourth quarter 2011 results,” analyst Felicia Hendrix wrote, thanks to “continued solid performance in Macau, especially in mass gaming.”
She expects Las Vegas Sands and MGM International Resorts to beat market expectations and for Wynn Resorts to report results in line with forecasts.

‘Despite January not being excellent, it is a good start to 2012 and the lunar year of the dragon’ - Sociedade de Jogos de Macau

Okada ‘innuendo’

Meanwhile Wynn Resorts asked a Nevada court to reject a suit filed by Japanese tycoon Kazuo Okada for access to financial records over the use of funds, which include a donation to the University of Macau.
In a filing made last week and quoted by Wall Street Journal, Okada’s request was referred to as “innuendo, hyperbole, half-truths and sweeping generalizations”.
The 69-year-old opposed the company’s HKD 1 billion “unprecedented” pledge in July 2011 to the University of Macau Development Foundation (UMDF). The company has committed to donating MOP 80 million to UMDF every year until 2022, the same year when its gaming license comes up for renewal.
Okada hinted that the pledge was an attempt to ensure the license is renewed.
Wynn Resorts said the pachinko tycoon had travelled to Macau to celebrate the donation. “It is safe to say that any reservations Okada had with respect to the donation were quickly cast aside,” the filing says.
“Wynn is left to speculate as to the objective of Okada’s strategy,” the document adds. “Wynn has nothing to hide and Okada knows it.”
In a statement released earlier this month, Wynn said the claims were merely an attempt to deflect attention away from Okada’s decision to compete with the company by pursuing a project in the Philippines.
The Japanese tycoon might be trying to pressure Wynn into buying out his stake “to develop casino resorts in the Philippines (Manila) and South Korea (Incheon), in addition to what he may have in mind for casino development in Japan should legislation eventually pass,” Bill Lerner of Union Gaming Research wrote in a report quoted by South China Morning Post.

V.Q.