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雷达卡
Global Gaming
Buy Macau, Not Vegas
On a tear — Since the market bottomed, the Vegas names are up an average
375% while Macau has underperformed the rally, rising only 89%. We did not
anticipate this rally for Vegas and continue to struggle justifying it.
Vegas is about REVPAR — Although it is less bad, we estimate REVPAR at both
MGM and WYNN in Vegas is down an average 33% in 2Q and see no respite as
we head into the traditionally weak 3Q. With up to 65% of Total Revenues
coming from non-gaming discretionary spending, margins are expected to stay
weak, leaving these names trading at relatively high valuations.
Better in 4Q? — Unfortunately not in Vegas. City Center looms, and we believe
it will cannibalize an already difficult market. High debt levels at home will
likely also see the US players selling interests in their crown jewels (growth) in
Macau to shore up balance sheets. With an ability to buy the growth separately,
sell Vegas, and buy the currently listed Macau Plays. We prefer the cheaper,
pure plays of MPEL and SJM and have also upgraded Galaxy to Buy from Sell.
Macau: positive — Our channel checks indicate gaming revenue could actually
increase YoY in July, despite an ~11% drop in visitor arrivals YTD. To our
surprise, LVS has not lost any share, and we see Cotai gaining ground on the
Peninsula with opening of CoD. MPEL is now sitting on ~18% of the market.
Commission caps — We believe all six operators now support a cap of 1.25%
on commissions. Combined with the appointment of the new chief executive
and Total Gaming Revenue only -5% YoY in 2009, it's looking up in Macau.
Green Shoots Seen in Macau but Not Vegas 3
Galaxy Entertainment (0027.HK) 12
Melco Crown Entertainment (MPEL.O) 20
Melco (0200.HK) 26
NagaCorp (3918.HK) 31
SJM Holdings (0880.HK) 36
Wynn Resorts (WYNN.O) 42
Appendix A-1 51
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