Apologies to Katy O’Keeffe for misspelling her name last week in our report on the Galaxy press conference. She has emerged as the most prolific journalist covering Macau – certainly while the SCMP’s Neil Gough is off galavanting around China. This morning she has a story on the Dow Jones wires based on an interview with SJM CEO Ambrose So, in which he says SJM has applied to take over Lot 7&8 from Sands China. She also got Sands acting CEO Mike Leven to react, saying he is not too worried about losing it, considering the US$100m his firm has already spent developing the plot, and that the government has a track record of giving land concessions to developers who have done some work on sites already.

Putting aside how outrageously unfair it would be if the government were to take back this site and give it to SJM, given the amount of investment Sands has pumped into Cotai compared to anyone else, and given SJM’s reluctance to do anything with its existing sites in Cotai previously, and given the lack of work being done on the Macao Studio City site, we have to wonder why SJM would want Lot 7&8 in the first place.

Indeed, Macao Studio City is a much better site. And SJM has already drawn up detailed plans for a casino called The Pearl, which is situated, interestingly enough, tucked into the northwest corner of the MSC site. And it could not have gone unnoticed this week that the Macao Daily News (Oumun Yatbo) ran a commentary directed at Peter Lam, boss of eSun, telling him that, in effect, his time for developing a casino on that site had passed and that he should focus on building the non-gaming facilities, which was his original intention anyway. Oumun Yatbo does not run such commentaries unless they have been penned by someone who knows exactly what they are saying. Reading between the lines, a more intelligent analysis than this newsletter is capable of might deduce that MSC will lose its right to run a casino operation but SJM will enable the property to have a casino on the northwest corner of the premises. Or maybe they will just reach an accommodation and redesign the entire site together. If such things were capable of happening in the real world, that is.

To be sure, SJM can do a lot better than Lot 7&8. Its other current site on Cotai sits to the east of the strip, bridging the gap between Wynn’s site and the site known as Hello Kitty, which will supposedly be developed under the SJM license. Given that Wynn will probably open next after Lot 5&6, and that the light rail will run down that side of the strip, we don’t see what’s so bad about the site anyway. MSC would be better, but Lot 7&8 is not exactly Eldorado.

Our biggest fear about what is going here, however, does not concern who gets what, but how they get it. Land allocations in Cotai are a very tricky business and a very sensitive topic north of the border. The potential for something to get screwed up here is high, and the last thing Macau needs is another task force sent from Beijing to investigate corruption allegations, which turns into unfavorable policymaking from the center again. Stay tuned.

Used with permission & copyright to  IntelMacau

MACAU, CHINA, September 6 2010 – PokerStars Macau at Casino Grand Lisboa held a hugely successful Macau Poker Cup (MPC) from September 1-5 awarding a record HKD $4,512,353 in prize money through the 5-day poker celebration. Three tournaments set personal record prize pools and total player entries crossed the 4-figure mark for the first time with 1060 players registering into the 7 cash tournaments.

314 players entered the Red Dragon main event making it the second largest ever and awarded HKD $2,859,912 in total prize money. The Red Dragon offered a handsome prize of HKD $643,000 for the winner. “PokerStars and Grand Lisboa are always striving to offer the ultimate poker experience for the players.” said PokerStars Macau Operations manager Danny McDonagh, “The team has worked hard and it’s rewarding to see the three biggest Red Dragon events this year.”

After 14 grueling hours on Sunday’s Day 3 Final it would be James McCarty from Japan coming out the victor. When the Red Dragon was down to the final three players it appeared as if local hero Ginger Keong was destined to bring home the title to Macau for the first time. Keong had over half the chips in play and seemed to be grinding down the competition. However, McCarty had a key hand where his pocket aces not only eliminated a player but simultaneously decreased Keong’s stack to 400,000 chips.

The two remaining players entered heads up play with McCarty holding a commanding 7-to-1 chip lead. Keong made some progress moving all-in each hand where McCarty folded. Eventually, McCarty made the call on the fourth shove and showed a dominating Q9 vs. Keong’s Q2. The board wouldn’t improve either player’s hands which meant McCarty would take down the pot and main event.

“I come here (to PokerStars Macau) every couple months and specifically like the deep tournament structure.” said the 27-year old winner, “I feel I played well but also got lucky at the right time .” Photos copyright of PokerStars Macau.

An exciting Final Round of the Third-annual World Series of Mahjong was held today at The Venetian® Macao-Resort-Hotel. 16 mahjong players battled against each other and after 9 hours of 3 elimination rounds, the World Champion was crowned. Chan Tak-Kwan, a furniture salesperson from Hong Kong, outlasted the other 200 participants from more than 10 countries to win the title of “World Champion”. Pao Jin-Long, another player from Hong Kong, settled for the second place while Yang Xun-Zhi from Taiwan and Li Jin-Dai from mainland China won the third and fourth places in the tournament respectively. It is the first time for the World Series of Mahjong to have players from Greater China playing together at the Final Table.

Chan Tak-Kwan, a 34-year-old furniture salesperson from Hong Kong, becomes the third World Champion from Hong Kong. He has been playing mahjong for over ten years. He was encouraged by his friends to participate in the qualifier organized by Blue Girl Beer in Hong Kong. Then he was sponsored by Blue Girl Beer to participate in the World Series Championship tournament in Macau, and fought his way bravely to the Final Table today. He did not perform very well for the first two days of the World Series, and he was originally in the fourth place at the Final Table. However, just like what happened to the 2008 World Champion, Chan fought over the other three players with confidence in the last few hands and changed his fate near the end. “The first thing I want to do now is to thank my friends who have encouraged me to participate in the Blue Girl Beer qualifier in the beginning. Chan took home a cash prize of HK$180,530, a World Champion necklace, a unique Venetian mask sponsored by The Venetian® Macao-Resort-Hotel, and a free seat in the 2011World Series of Mahjong.

Pao Jin-Long, the 31-year-old first runner-up from Hong Kong, has been playing mahjong for 18 years since he came to live in Hong Kong from America. “My parents taught me how to play mahjong. I think mahjong is very challenging, so it is a very suitable sport for a smart person,” said the confident Pao. He was awarded with HK$155,078 prize money.

Yang Xun-Zhi, the 51-year-old player from Taipei, has been playing mahjong for 35 years and settled for the third place today in the World Series. He had participated in the Second World Series but did not make it to the top 128 players on the second day of the tournament. “So I went home, studied the game rules and practiced hard. Today I can enjoy the fruit of my hard work!”, said Yang proudly. He took home a prize money of HK$124,297.

Li Jin-Dai, the 39-year-old beauty practitioner from mainland China, was disappointed about finishing in the fourth place. “Mahjong is my only interest and I have been playing for over 20 years. I often participate in the national mahjong tournaments in mainland China. Today, I had a leading position at the Final Table, but lost a lot of points to the Champion in the last few hands. Still, I believe I am a professional mahjong player!” said Li, who received a cash prize of HK$112,839.

The World Series of Mahjong was a three-day championship tournament launched in 2006 by World Mahjong Limited, a group of international media veterans and entertainment industry professionals. The World Series of Mahjong gathers top mahjong players from all over the world to vie for the enviable title of “World Mahjong Champion”. Details about the event – registration, rules and regulations, etc – are available on the official website www.wsom168.com.

Photos copyright World Series of Mahjong

Jim Murren, CEO and chairman of MGM Resorts (previously MGM Mirage) told Bloomberg the company plans to build “multiple properties” in Macau and is starting to “assert ourselves” through its joint venture with Pansy Ho. This came just a short while after Murren released second-quarter results that showed MGM the only property in Macau to register a sequential quarterly decline in ebitda for the three months to June. At US$61m, the result was down from US$71m in the first quarter of this year.

Now, admittedly, we should not be quick to judge that quarterly result on anything more than win-hold luck: MGM had held very well in the first quarter, and a pull-back was almost inevitable in the second quarter. For a property with such low market share of rolling-chip volumes, luck plays a more important factor than it does for the bigger players. Nevertheless, we have to wonder why MGM saw its rolling-chip volumes slightly decline over the three-month period when the rest of the market – its next-door neighbor most obviously in May – saw volumes rocket. Wynn did another HK$10bn in roll over the same period; StarWorld saw a whopping HK$26bn increase. Granted, mass-floor revenues recorded a nice rise and slots were not bad, either. But MGM has clearly been left behind in the VIP segment of the market, which accounts for two-thirds of gross gaming revenues and has been the driver of Macau’s eye-popping growth over the past 12 months. How much longer can management – i.e. Pansy Ho – tolerate this?

If Murren’s comments are to be taken at face value, the answer is no longer. We understand from our own sources that MGM is indeed starting to assert itself, though probably not in the way Murren intends to be understood. Aggressive new terms have been negotiated with junket consolidators and the company has just raised US$950m for refinancing of existing debt and “added liquidity”. New hires have been brought in to look at what’s going wrong with marketing initiatives – and, lo and behold, some of these are people who can actually speak Chinese. The idea is, obviously, to get volumes up, revenues up, ebitda margins up, and then roll out an IPO on the Hong Kong stock exchange. We look forward to seeing all that happen – especially the IPO part, because we cannot see why there should not be an accompanying adjustment in the equity ratio between the partners at that stage. Stay tuned.

Used with permission and copyright IntelMacau

The Macau Daily Times has a report today saying that Wynn Macau has applied to the government for a land concession on its 202,000-sq-m site in Cotai. The report went on to point out that Wynn will have to pay US$50 million to an unrelated third party to relinquish its rights to the land in question once the concession is granted. The newspaper then went a step further, adding some interesting background color by giving an abbreviated history of that neighborhood in Cotai, which involved land swaps and repurchases between the government, the University of Science and Technology, and Melco-Crown (for City of Dreams). Read the full story online at MDT.

Land allocations in Cotai were devised back in a different era in Macau, before the Ao Man Long scandal erupted. Needless to say, they all – every one of them – involved significant business and political interests. And because they were all on what was once considered Chinese state-owned land – i.e., the water from which they were reclaimed – their allocation was taken to a higher level of intrigue than Macau had previously been accustomed to dealing with. It is amazing that foreign players such as Wynn were able to navigate these waters in the first place and secure – if secure is the right word – development rights on Cotai. And it was always inevitable that they would have to pay off middlemen to secure those rights. This ain’t Kansas, Toto. The real question is why Wynn is coming under the spotlight right now. These disclosures were made in its IPO prospectus and reiterated in its quarterly results this year. This is standard operating procedure under US securities law, but by Chinese socio-politico-cultural standards, somebody somewhere is undoubtedly going to be feeling uncomfortable right now. Coming just a day after the land bureau chief announced the government was looking at land concession contracts again, it might just be coincidental timing. But it might not be. Curiouser and curiouser, as Alice once said. Stay tuned.

Used with permission and copyright to IntelMacau

MACAU, CHINA, August 9 2010 – PokerStars Macau at Casino Grand Lisboa hosted the Macau Millions from August 4-8 where the Asia poker tournament record for player field size was smashed.

Entering the first week of August, the record was held by the PokerStars.net Filipino Poker Tour at the Metro Card Club and stood at 679 players. On August 7 the record would officially belong to PokerStars Macau at Casino Grand Lisboa. Asia’s biggest poker room proudly announced the Macau Millions had a total of 741 entries.

Hong Kong’s Justin Chan was crowned champion along with HKD $275,000 in prize money. The tournament’s one million dollar guarantee was easily surpassed as HKD $1,467,180 was awarded to the 54 players that made it to the Sunday Day 2 Final.

Chan played an aggressive game worthy of the historic event and outlasted a landmine of pros, top ranked players, and title holders. However, the 30-year old MBA student would admit that the turning point came when he got all his chips in with Team PokerStars PRO Raymond Wu. Wu’s pocket aces severely dominated Chan’s AK but two kings on the board saved his tournament life. Chan never looked back as he relentlessly raised and re-raised numerous pots on his way to the final table. By the time heads up play began, Chan had built a 4-to-1 chip lead over his lone remaining opponent, American Tom Chou.

On the final hand, Chan moved allin and Chou made the call with K7. Chou had a slight edge as Chan only held 89. However, the flop paired Chan’s eight and sealed his victory as the remaining cards didn’t help Chou.

For the Macau Millions Winners List please click here.

Despite a definite preference for tournaments instead of cash games this was only the Hong Kong winner’s second visit to Asia’s gaming capital.

“This is my first major poker win,” said a humble Chan. “I was looking online at PokerStars in the Macau tab and joined because I wanted to play a big tournament!”

Chan’s online search paid off as he now moves into into 6th place on the Asia Player of the Year (APOY) Leaderboard. Raymond Wu maintains his number one ranking on the APOY list but now finds 8 other players within 1,000 points for Asia’s most prestigious poker award. PokerStars sponsored Victor Chen from Taipei is one of those players as his third final table in 2010 moved him up to 7th place and fellow Team PokerStars PRO Bryan Huang is a close 2nd.

PokerStars Macau now prepares itself for the Macau Poker Cup which takes place from September 1-5 and features the Red Dragon event with HKD $2,000,000 guarantee.

Photos copyright PokerStars.com

Mike Leven, president of Las Vegas Sands Corp., made an interesting comment that was not pursued enough by those listening to the conference call in the wake of the Sands China results this week. He said the company was having a rethink about its aggressive premium-direct strategy as it was worried about alienating junkets. Sheldon Adelson even said – and, to quote Dave Barry, we swear we are not making this up – that, “We are in active discussion right now since we terminated Steve Jacobs about the wisdom of accentuating the effort for direct premium play.” There is no way that Adelson could not have been the one who pushed that strategy in the first place, so to hear him challenge his own wisdom, albeit at the expense of the departed Jacobs, must mean something serious is going on. Stay tuned.

Used with permission & copyright to IntelMacau

Wynn Macau had an impressive 2Q by anyone’s yardstick, thanks to the smooth opening of Encore. Market share jumped in May and stayed high in June as VIPs flocked to the new hotel, even though the new gaming tables had been open for awhile already. It was a demonstration, if nothing else, of how important the art of hospitality has become in the gaming industry, even in rough-and-ready Macau. And it impacted the bottom line nicely, with ebitda coming in at US$216m, towards the top range of analysts’ forecasts and up 19% on the previous quarter – best in the market so far and likely to remain so. Nice enough for Wynn to declare a US$0.25-per-share cash dividend – the hallmark of a blue-chip company in this day and age.

Even though we cannot understand The Street’s disappointment – the stock fell in early trading after the results were announced – we do have a nagging feeling that something was missing in these results. Call it an under-outperformance. Expectations, our own included, were clearly too high, coming a day after Sands China reported. A few analysts, notably Praveen Choudhary at Morgan Stanley, have pointed out that Wynn is not pulling in the premium-direct business as aggressively as Sands China, and if its win-hold percentage had not been as high as 3.2%, the ebitda numbers would not been quite as stellar.

What we think might really be missing from all this, however, is simple conservatism: Steve Wynn is holding back because he sees recklessness all around him and will not follow suit. He has seen strong and steady growth in VIP volumes at his property thanks to a strong and steady relationship with his key room operators. He does a healthy premium-direct business, but he has never – unlike someone else – defiantly challenged the junket industry in Macau, knowing full well how difficult his life could become if he were to be alienated by people who are well-connected across the border. In 2Q, Sands China clearly overtook Wynn Macau in the premium-direct league tables. But we suspect Wynn sees it as a Phyrric victory.

The upshot of all this is that as rumors grind about MGM throwing out powerful incentives to major junkets to forsake Wynn Macau for its neighbor on the peninsula, president Ian Coughlan can afford to loosen his necktie after work each day while padding his pocket, which contains the waiting list of applicants for VIP table space on his property. He can also look at the competition and make sarcastic comments about the true quality of their accounts receivables.

Looking ahead, it was interesting to note Wynn’s comments about the size of his Cotai project: 62 acres, bigger than Lot 5&6. The man is not completely risk-averse, clearly. He might be looking at losing some share of GGR over the next three years as Galaxy and Lot 4&6 open on Cotai, but when he opens his own mega-resort, it will undoubtedly be a game-changer. Again.

Used with permission & copyright to IntelMacau

Adjusted property ebitda for a quarter of US$307bn would have been unthinkable a year ago. No longer. Sands China did just that, surpassing the most bullish forecasts by analysts thanks to an impressive widening of margins across all three of its Macau properties in 2Q. The Sands Macao did US$81m on a margin of 26.9%; the Venetian Macao did US$192.8m on a margin of 33.2%; and the Plaza Macao (Four Seasons) did US$33m on an incredible 49% margin. That, ladies and gents, is the difference of non-junket play: as percentage of total rolling-chip turnover, premium-direct accounted for nearly 25%.

It’s also the difference of non-gaming contributions. Casino revenue at the Venetian was US$500m during the period. Non-gaming revenue, a non-factor elsewhere in Macau, was nearly US$100m at the property.

However, there can be little doubt about who the real star of this quarter was. Without the contribution of the Plaza, with Andrew Billany at the reins and Kevin Clayton riding shotgun as group head of marketing, there might not have been as much to crow about. The ultra-luxurious property had an eye-popping month in June, when it was the only place in Macau to see revenues rise month-on-month from May. On a nearly 50% margin, that made a big difference at the finish line for the quarter.

The question is whether Sands China can keep the momentum going. We think it probably can. The Venetian has been having a great July on its mass floors and should do well again in August, as it does every summer. The Plaza seems to have found the right groove with high-rollers. And there is still significant room for improvement at Sands Macao on the peninsula. As mentioned yesterday, though, the new executives coming in next month will need to handle this baby with care. The machine ain’t really broke, it don’t really need fixing. Just a bit of fine-tuning should do.

Used with permission & copyright to IntelMacau

Two key executives have been appointed to run Sands China while acting CEO Mike Leven looks for a replacement for the departed Steve Jacobs and, hopefully, tries to convince Stephen Weaver to take the job. They are Edward Tracy, who comes in as COO, and David Sisk, as CCO (chief casino officer). Both have deep experience in gaming. Tracy previously ran Capital Gaming, “a multi-jurisdictional manager of Native American and Riverboat casinos” and did some time as … wait for it … CEO of the Trump organization. Sisk was CFO of Wynn Las Vegas and Encore.

Yesterday, we were of the opinion that Sands China was in fine shape. Today, we must be honest and say we’re not 100% sure. There is no way we are going to judge these two men on their CVs. But we must confess to wincing when reading them. To be sure, Sands China has become somewhat heavy on hospitality skills and could do with some beefing up on casino experience. But it is a long, long way from Atlantic City or Las Vegas, let alone a reservation or a riverboat, to Macau. There are good people available in Asia who have considerable experience running casinos geared towards an Asian audience and who know how to work in a multi-cultural workplace. Bringing in two top people from the US who have zero experience in Asia does not bode well for the smooth running of Macau’s biggest and most profitable gaming machine. Jacobs himself will attest to this. He broke a lot of eggs before he got around to making an omelette in his 15 months at the helm.

Indeed, it is commonly held around town that Sands China’s biggest competitor is too often itself. Due to the near-constant turnover of senior management at the company, too much time is spent reorganizing its org chart and not enough focusing on the customer. Along the way, valuable talent gets tossed aside in petty internal squabbles, ending up at rivals’ properties – Dennis Andreaci at Galaxy, Walt Power at Macao Studio City, and Kelvin Tan at MPEL being just three of the best that come to mind (not counting the guy at Grand Lisboa).

On its own, this would not necessarily be a problem. Sands China succeeds anyway, and it could be argued that such turnover and resulting internal friction is what keeps the corporate culture dynamic. Ultimately, Sheldon Adelson is the one who decides everything in any case, so bringing in a couple more foot-soldiers from the US may not have as much impact on daily operations as some may fear.

Yet that would be to assume that the market is standing still. It is not. In fact, were it not for some Herculean efforts by the marketing team over the past six months, Sands China might not be looking in quite as good shape as it is now. Premium-direct business in Macau is completely different than anywhere else, and it is only in the last two months that it has really started to kick in for Sands China at The Plaza. Had it not, tomorrow’s conference call might have been a tough one for Adelson to conduct, as the junket business has clearly been declining at the Venetian and Sands Macao. Bringing in people to stand over this team who have no experience of Asian gaming could – we’re not saying it would, but it could – have an outsized effect if they start tinkering with such a sensitive and volatile business. And given the corporate culture of the place, these are people who are going to be under extreme pressure from HQ on a daily basis to prove themselves worth the paycheck.

That said, there is also a lot of upside potential to unlock, and if these two executives simply focus on managing the people rather than the business, we see continued strong growth ahead. The hardware is unique and the software has been improving. The organization is full of good people who know how to do their jobs well. What they need is security and focus. If Tracy and Sisk can unite and build, rather than divide and conquer, then the competition should have reason to fear. Stay tuned.

Used with permission & copyright to IntelMacau