It looks like 2010 is going to end with a bang, with gross gaming revenues breaking the all-time record for a month and possibly set to smash the MOP20 bn mark. We will find out in a few days, but we thought it best to sound a slightly triumphant note as we ring out 2010 and prepare for another prosperous year ahead in Macau.

It’s been quite a year, for sure, but we think there is still plenty of running ahead of us. There is never a dull moment in this amazing town, and 2011 promises more of the same: the same drama, the same unpredictability in politics (corporate and family), and the same restless change. Here’s what we see as potentially the top issues to watch out for.

1) Gross gaming revenues will soar GGR will hit MOP27bn a month. Just watch it. Inflation is not a problem for Macau, which is being held up as a poster boy of brotherly love for Taiwan. It’s not about the number of gamblers, either. It’s about all the liquidity sloshing around the region, which is making it’s way into the junkets and the pockets of rich, well-connected individuals in and around Greater China. They are facilitating the outflow of money from the mainland which needs to be cleaned and recycled, and Macau is playing a vital role in this – and taking its 2.97% cut in the process.

2) Visitor arrivals will slow Macau is hitting saturation point in it’s immediate hinterland. Look at the November arrival numbers: up just 6.5% YOY. Which means expectations for the mass market are probably getting ahead of themselves. The high-speed railway arriving in Zhuhai is almost two years away, so don’t expect miracles from that in the coming year. The extension of the Guangzhou MRT system, which terminates in downtown Zhuhai (not near Gongbei), will likely impact the inter-city buses, but not passengers bound for Macau, for whom convenience is everything. It is supposed to open mid-year, but has also run into delays, so no one should be holding their breath. Long-distance marketing will remain a pipe dream while the Big Six continue to fight each other so childishly at the border points instead of putting their heads together and figuring out a way to do what the MGTO is not mandated to do.

3) Stanley Ho will settle his inheritance The era is passing with the man. We wish him the best of health, but it has become clear that the man who put Macau on the map as something other than a smugglers’ den is preparing to move on to that great casino in the sky. Wife No. 2 inherits the keys to the realm, but finds several doors bolted from the inside by Wife No. 4, who is now the Managing Director of SJM. That is the way it must be, we suspect, if peace and harmony are to reign throughout the land once the king is gone. As mentioned before, SJM has become the de facto Macau issuer of Treasury Bonds. It is too important a company, if that’s what one might call it, to become anyone’s fiefdom. A balance of powers is in everyone’s interest.

4) Pansy will get her IPO The rising tide is lifting all boats, including MGM Macau’s. The place has efficiency issues, but these can be easily papered over when the market is growing so strongly. We still wouldn’t give it as high an Ebitda multiple as MPEL, let alone Sands or Wynn, but we do think the IPO is a no-brainer. There’s plenty to go around in Macau now and in the foreseeable future.

5) Lawrence will get his way Yes, the rejection by Melco shareholders of his proposed compensation scheme this week for himself and his henchmen was embarrassing. Like Joe Stalin once famously observed, “The problem with elections is you never know who’s going to win them.” But we actually think this makes Lawrence Ho look a lot better than his rapacious sister, who sucked more than a billion HKD out of her concession recently without anyone noticing. He is playing fair by his shareholders, as any good corporate governance-minded CEO should be. And his concessionaire is already vastly outperforming his sister’s, too. We think it’s only a matter of time before the market realises he has actually done quite a good job with Melco-Crown under the circumstances in the last three quarters and decides to rerate his stock. He was just a bit premature with this compensation plan, which was more about his key staff than himself, anyway. Once the shareholders have started feeling some love in the stock price, we think the plan will be revived and passed.

6) Steve Jacobs will get his revenge The counter-claims filed on December 22 by Las Vegas Sands against the former Sands China president, Steve Jacobs, for his abrupt termination in August last year, are trite. We think there is a case in motion here of the Emperor being surrounded by people who won’t tell him he has no clothes. This lawsuit has already cost LVS far more than it was worth. Adelson has so much more to lose here than Jacobs does. Like the Cliff Cheong case that went to the eve of trial, Adelson will probably take this one to the brink. But we can’t see any way for this to turn out well for the company. Whether he gets paid in court or out of it, we see Jacobs getting even for his ignominious dismissal and pocketing a bunch of change. The real question is what the political ramifications will be. How much more public embarrassment can the Macau and Beijing governments take?

7) Galaxy Macau will disrupt the market There is much speculation gripping the chattering class in Macau at the moment about problems on the Galaxy Macau site, with suggestions swirling that the property is months behind schedule. Pay these rumors no heed. It won’t be a perfect opening – they never are – but it will get open before mid-year and it will be a significant disruptive force. With visitor arrivals flatlining, Galaxy will need to compete aggressively for mass players, and we have every confidence that it will. It won’t happen immediately. The Venetian and City of Dreams have big headstarts with their loyalty card programs and established brands. But Galaxy Macau has great hardware. We think it will take share from everyone and end up with at least 10-12% of the market. The only question is how much Starworld will be left with.

8) Re-ratings across the board will happen. Here’s the biggest punt of all, which we will leave to last. It is possible, very possible, that Sands will get approval to start selling the Four Seasons apartments. We’re not sure when, but if it happens this year, it would signal a watershed moment for Macau’s concessionaires. Everyone else would jump on the bandwagon, and the value of the land parcels in Cotai would go through the roof. Non-gaming projects such as Angela’s theme park would become more attractive, Galaxy would become a more serious real-estate play, and valuations would have to be adjusted upwards.

In the meantime, may we take this opportunity to wish all our subscribers a prosperous 2011. And please stay tuned.

Used with permission and copyright IntelMacau