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Gaming | Stock Watch
Future shock
Gaming stocks will take some knocks this year but investment houses forecast some brighter news as Cotai continues to grow
BY RAY CHAN
up to be the key obstacles to Macau’s booming gaming industry this year. In- dustry executives say gross gaming rev- enue is likely to slow to about 15 to 20 percent annual growth this year from last year’s 40 percent plus growth. That is destined to impact on valuations. Citigroup says there is still “ap-
A
preciable upside” for gaming stocks. A recent report noted that the Macau casino stocks are trading at 8.7 times the bank’s target Enterprise Value/ EBITDA this year,
signi cantly less
than the 10.3-times historical average and re ecting concerns around growth this year. One segment that may see growth
is gaming operators waiting for land grants
JANUARY 2012 in Cotai. SJM Holdings Ltd.
(
0880.HK) and Wynn Macau Ltd. (
1128.HK) appear closest to nalising
weakening international outlook and tighter economic conditions in
the mainland are shaping
land deals. Expect to see a boost in share prices if the government gives the go-ahead. Last month, SJM announced it had
received a letter from the government saying it would be granted a land par- cel
in Cotai. Of cials were quick to
comment that no nal decision had yet been made. “We got a letter saying that it [the
government] will grant the land to us but we haven’t been given any further notice about, for example, the premium payment,” SJM Holdings Ltd.’s chief executive Ambrose So Shu Fai told TDM. Mr So expects the grant proc- ess to be completed this year, with SJM ready to invest up to MOP16 billion (US$2 billion). Back
in September, Wynn an-
nounced it had formally accepted the government’s terms and conditions for control of a 20-hectare plot of land in Cotai. In a ling to the Hong Kong
exchange, the company said it would pay a land premium of MOP1.55 billion for an initial term of 25 years. Again, the government replied the application was still being reviewed and that no - nal decision had been made yet.
Central story It is a similar story for Macau Studio City, the stalled development that Mel- co Crown Entertainment Ltd. HK,
MPEL.US)
(6883. bought a majority
stake in last year. Secretary for economy and nance
Francis Tam Pak Yuen said the gov- ernment had not yet received an ap- plication from Melco Crown to include gambling at the revamped project. Mr Tam said if an application was led, the Gaming Inspection and Coordination Bureau would consider it according to the relevant legislation. What is con rmed to take place this year is the opening by Sands China Ltd.
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