Macau Electronic Live Multigame Terminals More Lucrative Than Mass Tables …

30 Jun 2015 | Author: | No comments yet »

Can Macau Get Worse? Full Smoking Ban, 40% Fall In Gaming Revenue.

Macau’s controversial table cap could be a blessing in disguise for casino operators. The number of people – residents and non-residents – employed in “gaming and junket activities” in Macau rose 1 percent in the March to May period inclusive, compared to the previously measured period of February to April, despite the reported redundancies that have occurred in Macau’s VIP gaming segment. Because Macau authorities limit table supply expansion to 3% per year, casino operators have installed vast stadium style live dealer multigame areas. The perceived shortage of tables also enable casinos to push up minimum bets – at least before the yearlong gaming revenue pullback – and offer EGT terminals as an alternative for smaller bettors. Investment analysts at Morgan Stanley Asia Ltd said in a report on June 16 that the city’s casino operators had “limited room to cut costs”, adding it expected them to move some existing – and currently in the gaming downturn, underused – staff from already operational properties to the new ones on Cotai when they open. “Operators now expect wage hikes in line with CPI [consumer price index] of 5 percent per annum in coming years, but given negative organic [gaming] revenue growth, margin erosion is meaningful.

Union Gaming points out that the multigame format, which can include roulette and dice game sic bo (as known as big small) as well as multiple baccarat games, may appeal to players who can afford live table limits but prefer the faster action and/or anonymity of terminals. Existing casinos are hoping 5 to 15 percent of their staff join upcoming new casinos; so Sands [China Ltd], MGM [China Holdings Ltd] and SJM [Holdings Ltd] are carrying excess staff for longer.” Macau’s accumulated casino gross gaming revenue for the first five months of 2015 stood 37.1 percent lower than in the same period in 2014, according to Macau government data. The US$3.2-billion Studio City, 60-percent owned by Melco Crown Entertainment Ltd is expected to be the next opening in Macau – on a date later this year yet to be confirmed.

The rest of the Macau seats are part of fully automated table game standalone units manufactured by Aruze, Alfatreet, Novomatic, Interblock and Scientific Games’ SHFL (nee Shuffle Master) brand; the latter two also make stadium style installations popular outside Macau. MGM Cotai, from MGM China, has a capital budget of US$2.9 billion, excluding land costs and capitalised interest, and is due to open in the autumn of 2016, according to filings by the parent MGM Resorts International. Over the next three to four years, Union estimates an additional 4,150 ETG seats, 2,850 of them in Macau, almost all of them stadium seats. (Japan casino gaming legalization and other proposed projects could add another 3,150 seats by 2022.) Macau gaming regulator DICJ counts fully automated ETG terminals the same as a single slot machine, no matter how many seats they have.

The Parisian, a new US$2.7-billion resort from Sands China, is likely to have a first phase opening between “late summer to November 2016”, said the parent Las Vegas Sands Corp in April. When the mass gaming floors became non-smoking in October 2014, mass gaming revenue fell 12%. “The impact on VIP revenue would be similar,” wrote Deutsche analyst Karen Tang. Union estimates that DICJ counts 50 to 60 stadium seats (ie, gaming terminals) as one gaming table, compared with the nine seats at a traditional baccarat table.

By contrast, Singapore’s Casino Regulatory Authority counts each gaming terminal position against its casinos’ limit of 2,500 electronic gaming device positions. Stadium EGT seats have purchase and installation costs that live tables don’t, approximately MOP160,000 per seat or MOP8.8 million per table equivalent, Union estimates.

That makes the adjusted daily earnings before interest and taxes (Ebit) for a ETG table equivalent approximately MOP38,271, still 37% ahead of live mass market tables during this year’s first quarter.

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