Majestic Research

Reuters

Las Vegas Sands, Wynn Shares Drop on Macau Concerns

By Chris Reiter
Published: October 03, 2007

The shares in Macau casino operators Las Vegas Sands Corp and Wynn Resorts Ltd fell sharply on Wednesday because of signs of disappointing growth in the Chinese gambling haven.

Morgan Stanley said preliminary September gaming revenue for Macau indicated growth of 55 percent, below the broker’s forecast of 75 percent.

“The gaming revenue number implies that the new supply that came to the market shifted revenue rather than grew the market incrementally,” Morgan Stanley analyst Celeste Mellet Brown said in a note. “We also believe mass market revenue growth for the entire market was disappointing.”

Las Vegas Sands, which is spearheading the massive Cotai Strip development, and Wynn are betting big on Macau.

“It’s such a speculative investment at this point because so much of the valuation is tied up in properties that haven’t opened yet,” said Matthew Jacob, an analyst with Majestic Research.

Las Vegas Sands shares, which rose 54 percent this year before Wednesday’s fall, plunged $17.03, or 11.8 percent, to close at $127.53 on the New York Stock Exchange, wiping out about $6 billion of the company’s market value.

Wynn shares, which had risen 77 percent this year before Wednesday, fell $16.43, or 9.9 percent, to close at $149.40 on Nasdaq, as its market capitalization fell about $1.7 billion.

Tourists Rather Than Gamers

In late August, Las Vegas Sands opened the $2.4 billion Venetian Macau, the world’s largest casino and the cornerstone of a $24 billion effort to bring Las Vegas-style gaming to the Chinese gambling enclave.

Like Las Vegas Sands, Wynn is expanding in Macau. It plans to spend $550 million to $600 million on the planned Wynn Diamond Suites, which is expected to open in 2010. When completed, Wynn expects to invest $1.2 billion on its existing Wynn Macau casino.

“Visitors to the Venetian seem to be more leisure players, as opposed to more dedicated bettors,” said Vance Wells, executive vice president at China Primary Reseach, which tracks the Macau gaming market.

He said growth in Macau’s mass market gaming has been relatively flat and is not expected to keep pace with supply growth in the short term.

Meanwhile, competition for high rollers between Las Vegas Sands, Wynn, Melco PBL’s Crowm Macau, and the Grand Lisboa Casino, controlled by Macau gaming tycoon Stanley Ho, has been heating up, in some cases leading to higher commission rates paid to junket operators.

“We’re not seeing them being able to (lower commission rates),” Wells said.

Last week, Wynn launched a new share offering, raising about $682 million. The issue was priced at $158 per share.