Macau

Macau’s government stands to reap $85.4 million next year in taxes on commissions paid by casinos to junket operators, according to local media reports. The figure in next year’s budget is 1.9 percent higher than this year’s. A withholding tax of 5 percent is levied on commissions paid by the casinos to the junkets.

 

JP Morgan says Sands China Ltd has the biggest upside of the territory’s casino operators because of its exposure to mass-market gaming. This means the company will “post attractive growth”. Hotel rooms in the Sands Cotai Central casino resort and an improving yield will drive success.

Wells Fargo Securities said mass market gaming revenue growth is outpacing that of the VIP sectors, gaining 34.8 percent so far this year, 

compared with just 13.2 percent for the VIP sector. Slot machine revenue growth has been 8.4 percent. That trend was seen in the latest November figures with the mass market growing by 39.4 percent and VIP revenue up 14.8 percent, the firm said.

 

Macau’s casinos would like to establish smoking rooms, without gaming facilities inside, much in the way airport lounges provide space for smokers, local media said. The Health Bureau said it received a petition from the six casino concessionaires and sub-concessionaires asking for the changes. It now plans to hold talks with the gaming regulator and seek a legal opinion on the matter. However, Health Bureau director Lei Chin Ion indicated support for the idea, telling local reporters, that in this way “most of the casinos’ gaming areas would be smoke free.”

Goldman Sachs has downgraded Melco Crown from Conviction Buy to Buy, but has upped its price target to $43.00 from $34.10. MGM China replaced Melco on the Conviction Buy list. Analyst Simon Cheung said Melco is unlikely to be able to continue to produce dramatic positive earnings revisions in the next six-to-12 months as it has already strongly outperformed its peers.

Iao Kun Group Holding Co. says it’s unlikely to meet its non-GAAP income guidance for 2013 because of low win rates in October and November. The VIP room operator said its November rolling chip turnover gained 19 percent to $1.5 billion. The win rate for November was 1.64 percent. The company said the low win rates also caused it to record an operating loss for October and November, but didn’t give details.

Melco Crown Entertainment is expanding its non-gaming attractions, with a project styled on London’s Soho District, local media cited CEO Lawrence Ho Yau Lung as saying. The attraction at the City of Dreams resort will open next year and will mark the fifth anniversary of the opening of the development. The company will add more non-gaming attractions next year, he said.

First Natural Foods said it agreed to buy Hang Seng Sociedade Unipessoal Limitada, a junket operator which runs seven VIP rooms in Macau, for $400 million, as it diversifies its business base. “As the group’s first strategic move into the gaming industry, the acquisition is considered as a conservative, yet appropriate investment given the company’s lack of relevant experience in the gaming business in Macau,” it said in a regulatory filing.

The enforcement of smoking bans in Macau’s casinos has been unsatisfactory and 16 establishments that failed a second-round of air quality tests will have to reduce the size of their smoking areas by 10 percent next month, local media said. The territory’s anti-smoking law requires casinos to have no-smoking areas covering at least half of their gaming floors.

Macau’s gaming stocks are likely to continue to lag Hong Kong’s Hang Seng index, with the stock prices seeming to have become immune to positive news flow, Credit Suisse analysts Kenny Lau and Isis Wong wrote in a note. 

However, the firm said it doesn’t expect a major correction in stock prices as market sentiment is not “overheated.” Credit Suisse favours Melco Crown because of its exposure to the premium mass market.

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