Sands China’s Parisian opens next month
Brokerage Daiwa Securities Group says some analysts are overestimating the significance of two new resorts opening on Macau’s Cotai Strip.
In a note, the brokerage said, “The Street expects the back-to-back openings of Wynn Palace and the Parisian to expand Macau’s gaming market meaningfully, with market share seen shifting in favor of these operators. But this expectation seems unrealistic to us given the operators’ historical track records.”
Last week, Steve Wynn’s $4.2 billion Wynn Palace celebrated its grand opening on the Strip; it’s Wynn’s 13th resort and the most expensive ever built in Macau. Sands China’s Parisian Macao is set to open September 13. It will be the operators’ fifth entry in Macau, reported the Macau Daily Times.
Daiwa says Wynn has been “steadily losing market share since Wynn Macau opened in 2006,” and Sands lost market share after the Four Seasons opened in 2008. At that point, “Sands actually ceded more than one-third of its mass market share to its competitors—a 10 percentage point change equivalent to more than the entire market share of Wynn or MGM today.”
While the results remain to be seen, Wynn has made no secret he’s aggressively courting the VIP segment, even as other operators work to develop the mass market. Wynn Macau will feature three junket operators, according to the Macau Business Daily: the Suncity Group, Tak Chun Group and Guangdong Group.
VIP rooms are also reportedly coming to Melco Crown’s $3.2 billion Studio City development, which eschewed the high-roller lounges when it opened last October. It was a first for Macau, though Lawrence Ho, MCE’s chairman and CEO, recently said the operator always intended to set aside “approximately 30 tables” for VIPs.
The Hollywood-themed property could use a boost. The Times reports that ratings agency Standard and Poor’s has issued a negative outlook for Studio City, even warning that the project could default on a US$1.41 billion loan used to complete construction of the hotel. A report from Bloomberg News indicates Studio City may have trouble borrowing money to cover its existing debts. If that’s the case, Melco Crown’s partners, U.S.-based hedge funds Silver Point and Oaktree Capital, could be the first to feel the pain.
The report also noted that Hong Kong-listed Melco Crown, which has a 60 percent stake in the investment, has placed Studio City “within an entirely separate credit group, so its debt is non-recourse. Investors should not assume that Melco Crown Entertainment Ltd. will provide any financial support to Studio City or that it would step in for Studio City.”
The news may be better for Wynn. Brokerage Telsey Advisory Group LLC says the opening of the Wynn Palace “should be a positive event for the company and its targets are achievable.” It added that “the primary driver of revenue and profit growth in the market at present is visitation and spend-per-visitor rather than the supply of tables.”
As always, outlooks differ. Richard Huang, a gaming analyst in Hong Kong, says Wynn never would have lavished $4.2 billion on the property if he had known the obstacles the market would be facing when it opened, reports the website Shanghaiist.com.
But Merrill Lynch analysts suggest the region’s gaming stocks are likely to see a sustainable recovery in the second half, with a possible 11 percent growth before the end of 2016. Golden Week in October presumably would propel mass revenue over the next two months.
