February 1, 2010
GAMBLING-MAD, the Chinese get it where they can
Scores of gamblers, including people from Europe and Southeast Asia, were arrested recently in a raid on an underground casino on the Chinese mainland that was raking in more than US$3 million a night less than 50 miles from Macau.
The two-story gambling den, fitted with 23 tables, VIP rooms and a kitchen, was located behind a hotel in Donguan, Guangdong Province, just across the Pearl River Delta from the one place in China where casinos are legal.
A report by Inside Asian Gaming citing the South China Morning Post said croupiers believed to be from Macau worked the tables, and the casino, run as a very sophisticated operation along “Macau industry standards,” even offered security escorts to big winners.
Residents living nearby said they had been telling local police about the place for years, but no action was taken until provincial investigators paid two undercover visits last September.
The owner of the illegal operation is said to be linked to the powerful Hong Kong criminal gangs known as triads.
IAG described the operation as part of a “parallel and apparently increasingly well-organised illegal casino industry across the border [from Macau]. Moreover, it’s one that can offer more monetary value to the ‘customer’ because it doesn’t have to share revenue with the government.”
Despite the fact that gambling has been outlawed on the mainland since the Communist Party took power in 1949, it appears to be more widespread than ever.
There are just two officially sanctioned lotteries in China, a country where more than half the population lives in rural areas on an average of 4,700 yuan a year, the equivalent of 700 U.S. dollars. Yet, according to a recent report in The Telegraph, a British daily, an estimated 1 trillion yuan, or about $150 billion, is wagered illegally each year — equal to the entire economic output of Beijing — in card and mahjong schools on street corners, in underground casinos in the cities, through unofficial lotteries in the countryside and on hundreds of Web sites.
Last year, some 600,000 mainland Chinese were arrested for illegal gambling, the report said.
HONG KONG LISTING IN CARDS FOR MGM
MGM Mirage is moving forward with plans to list its Macau operations on the Hong Kong stock exchange, but with the expectation of raising considerably less money than its competitors managed last year.
Two analysts in recent research notes said the IPO is expected to fetch between US$375 million and $500 million, according to Reuters, which assigned a probable second-quarter launch.
LVS subsidiary Sands China raised US$2.5 billion in its November IPO, while Wynn Macau raised $1.87 billion in October. The offerings were among two of the top 10 IPOs in Asia last year and helped Hong Kong achieve the status as the exchange that produced the world’s largest IPO proceeds.
News reports said MGM Mirage’s chance of achieving a similarly high valuation may be tough amid lingering concerns about the company’s 50-50 joint venture partnership in Macau and its current lack of expansion plans in the lucrative Chinese gambling enclave.
“Wynn and Sands were priced at 13 times [EV/EBITDA] multiples, and MGM is a relatively weaker player,” said Gabriel Chan, an analyst with Credit Suisse, “so the market would probably put a discount on it at 11.5 times.”
MGM, which operates in Macau in partnership with businesswoman Pansy Ho, daughter of local gambling tycoon Stanley Ho, has only one casino in Macau, the MGM Grand Macau. It had the smallest share of the market last year at just under 9 percent. Las Vegas Sands had a share of 23 percent and Wynn about 15 percent, according to analysts cited by Reuters. They say investors also may be wary of a repeat of Sands China’s weak IPO, when the firm’s shares fell 10 percent below the issue price amid concerns of steep valuations and oversupply in Macau.
The MGM Mirage-Pansy Ho partnership also has raised concerns on the regulatory front in the United States. Last May the New Jersey Division of Gaming Enforcement found Ho unsuitable for a gaming license and issued a report recommending that MGM Mirage sever business ties with her.
SINGAPORE HOPES CASINOS WILL LIFT SAGGING ECONOMY
Singapore’s economy is expected to grow at a relatively sluggish pace this year as the city-state awaits the opening of the Genting and Las Vegas Sands gambling megaresorts.
In a report in Bloomberg, Trade Minister Lim Hng Kiang said overseas demand for Singapore’s exports is likely to remain weak, but the government is working to reduce the nation’s dependence on electronics manufacturing, and this is evidenced in no small part by the decision to allow casinos for the first time.
“Domestically, the opening of new facilities for the chemicals and biomedical manufacturing clusters, as well as the opening of the Integrated Resorts, will also provide a boost to growth,” Lim said, adding that the nation will probably avoid sliding back into a recession amid an “uneven” recovery in 2010.
Singapore’s economy shrank in the fourth quarter of 2009 as weaker manufacturing output interrupted the nation’s rebound from its deepest slump since independence in 1965.
The economy will grow 3 percent to 5 percent this year, Lim said, reiterating previous forecasts.
GALAXY CLOSING IN ON FINANCING FOR MACAU MEGARESORT
Galaxy Entertainment Group said it expects to have a plan this month to complete the financing for its HK$14.1 billion (US$1.8 billion) flagship Macau casino.
Robert Drake, the Hong Kong-based company’s chief financial officer, told Dow Jones Newswires the plan will cover the remainder of the financing needs for the project, dubbed Galaxy Macau, which includes a casino and three hotels in the Cotai Strip section of the peninsula. When completed the resort will have 600 gambling tables and 2,200 rooms, suites and villas.
Selling shares is not among the funding options being considered, according to news reports. Rather the company is looking to raise up to HK$8 billion in debt, and has hired Bank of America-Merrill Lynch as financial adviser. Options are said to include syndicated loans, high-yield bonds or a mix of both.
Galaxy announced previously that it had already committed about HK$5.1 billion to the project, which is slated to open in the first quarter of next year.
NEW LICENSE ALLOWS LV SANDS TO EXPAND ITS FERRY OPERATION
Las Vegas Sands’ Macau subsidiary has won a 10-year license to operate expanded ferry service between Macau and Hong Kong.
Sands China was awarded more routes for its CotaiJet service, including the addition of several daily round trips between Hong Kong International Airport and Macau’s Taipa Ferry Terminal, which is located minutes from the company’s massive Venetian Macao casino resort on the Cotai Strip.
Under the new license, CotaiJet can operate up to 35 daily round trips between the Hong Kong and Taipa ferry terminals.
“Opening new routes and increasing capacity from Hong Kong to Macau will facilitate the growth of the meetings, incentive, convention and exhibition business,” said Sands China CEO Steve Jacobs. “The additional routes will also provide substantial flexibility for our guests.
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