Inside Asian Gaming

INSIDE ASIAN GAMING | March 2010 26 M ixed signals continue to be pumped out of Hong Kong and other stock markets regardingheavily indebted acau gaming operators that also have exposure to Las Vegas. On the one hand, investors and analysts like the revenue performance seen in the aggressively growing Macau gaming market. On the other they appear to remain slightly nervous about the general level of gearing of those operators in the Macau and Las Vegas markets in relation to their project debts, though a lot less jittery than they were 18 months ago. They do however still fret about the likelihood of more ‘go’ ‘stop’ management of Macau’s economy by China’s central government in the form of visa restrictions on Mainland residents and on the credit available to VIP players, and continuing modest revenue performance in Las Vegas. On balance, investors appear proportionately to be rewarding Wynn’s performance in Macau more generously than that of its Nevada-based rival Las Vegas Sands Corp. LVS’s position is however improving rapidly, with suggestions that construction work on its suspended Cotai plots will begin in earnest during March. Even MGM MIRAGE, a 50% partner in MGM Grand Macau, no longer looks the basket case it was during the height of 2008’s financial crisis. In late February the company reported strong performance at its CityCenter property Las Vegas during Chinese NewYear adding it hoped to launch a local unit on the Hong Kong stock market in “mid year”. It followed that up with news that it has bought valuable time from its creditors. MGM MIRAGE has now secured a deal with key lenders to extend the maturity on part of its US$5.55 billion bank debt by two and a half years. The guy in the bar A concept known as ‘the wisdom of crowds’ maintains that human beings—via a mixture of personal observation, previous experience and common sense—generally tend to arrive at an accurate assessment of weights, measures and more subjective topics such as fair value for a business. That applies even when they don’t have access to as much information as the ‘quants’— the generally bright and well educated financial analysts that perform quantitative and numerical analysis on a company for investment institutions. The wisdom of crowds is probably what is being referred to in investment circles by the notion that markets are always ‘right’. In the end they distinguish pretty successfully betweenhype andhyper value, andbetween hope and hard facts. Markets may always be ‘right’ in the long run, but they are not always rational in the short one. Not only can they be manipulated by individuals for quick personal or private institutional gain–they can also seemingly be randomly panicked into behaviour—such as selling off—when key indicators or trends on key indicators seem to be suggesting ‘hold’ or even ‘buy’. A persistent and underlying volatility in Asian equity markets rather concern about any particular performance trend might explain why Sands China, the Hong Kong- listed unit of Las Vegas Sands Corp., saw 4.5% shaved off its share value in the first day of trading after the Chinese NewYear holiday in mid-February. It was apparently in reaction to some numbers that came out of the New York market regarding LVS’s global results Sunny Side Up Investors reward Wynn in Macau as LVS and MGM MIRAGE prospects also brighten Macau Operators Steve Wynn