IAG 2006-08-09 Aug-Sep - page 20-21

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andmassmarkets,wehaveexplicitly forecast
thegrowthof each segment separately.
High rollermarket to drop to 4% Cagr
We project theVIPmarket will experience a
low rate of growth, averaging 4% through
2006-09 given its relatively higher penetra-
tion compared to the mass market. More-
over, current issues related to rising junket
commission rates and tightened regulations
on credit provision will hinder new players
fromentering thismarket.Thesurge invisita-
tion from themainlandChinesemiddleclass
population will contribute more to mass
market rather thanVIPgrowth.
Acceleratingmassmarket growth
We believe the mass market still has much
untapped potential, with adequate room
for the comingpipelineof large scale casino
resorts. We expect growth in mass market
gaming to be driven by rising tourist arriv-
als on the back of expansion of the wealth
effect on themiddle class inmainlandChina
and improvements in tourism infrastructure.
These twokeydrivers shouldencouragevisi-
tors to increasepercapitagamingspendand
lengthen visitor stay in the city.We forecast
per capita gaming spend per day to grow
at a Cagr of 6% from 2006-09while average
lengthof stay could increase from 1.3 to 1.7
days over the same period. As such,we esti-
matemassmarket gaming revenue to grow
by33% through2006-09,with themassmar-
ket share of total gaming revenue climbing
from26% in2004 to52%by2008.
Backend loaded 2006
We project the addition of more than 1,000
gaming tables over 2006. Most of the new
supply will come from new casino resorts
scheduled toopen in thesecondhalfof2006
includingWynnMacauandGalaxyStarWorld,
and thebalancewill bederived fromcasinos
under the SJM umbrella, Galaxy’s city clubs
chainand theSandsexpansion.
2007-08: Transformation of Cotai
Weproject a spike in the supply of gam-
ing tables,with the additionof around 3,000
tables over 2007-08. Over half of this new
supplywill come from theopeningofmega-
size integrated resorts such as the Venetian
Macau,GalaxyMega,MGMGrandParadise (a
joint venture with Pansy Ho) and theWynn
expansion. In addition, the Melco/PBL JV is
scheduled to launch the Crown Macau and
CityofDreams in2007and2008 respectively.
The SJM pipeline includes the Grand Lisboa,
ArcofTriumph,Ponte16andotherupcoming
casinos.Ourprojectionsarebasedonpublicly
announced projects, adjusted for our expec-
tationson their likelihoodofmaterializing.Al-
though thepotential forunderestimationex-
ists,webelieve themarginoferror isminimal,
as further projects are likely to be relatively
small, and, in the case of major projects, the
likelihoodof completionbefore2008 is low.
Combining themarket forces
Given that we project a surge in industry
Casino supply forecast (number of gaming tables)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
(No. of tables)
2004
2005
2006E
2007E
2008E
2009E
SJM
WynnResort
MGM/Pansy
Ho
1,100
1,400
2,600
4,300
5,400
6,700
MelcoPBL
Las Vegas
Sands
Galaxy
48%Cagr
Source: DeutscheBank
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
2006F
2007F
2008F
Macau avg
11,700
12,200
11,600
10,800
10,100
8,800
6,400
4,700
4,600
VIPmarket
34,500
36,100
31,900
28,100
30,300
18,700
17,700
11,700
10,800
Massmarket
5,300
5,700
6,000
6,100
5,400
4,700
3,400
3,200
3,200
Slotmachines
122
146
144
139
140
136
140
100
100
Tablewin (US$/table/day)
Source: DeutscheBank
Source: MacauGovernment tourist Office, DeutscheBank AG
Deutsche Bank - MacauMap
Tablewin forecast
30,000
20,000
10,000
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 2006F 2007F 2008F
(US$/table/day)
11,700 12,200 11,600 10,800 10,100 8,800
6,400
4,700 4,600
VIPmarket
Macau avg
Massmarket
Source: DeutscheBank
DB forecast
1...,2-3,4-5,6-7,8-9,10-11,12-13,14-15,16-17,18-19 22-23,24-25,26-27,28-29,30-31,32-33,34-35,36-37,38-39,40-41,...52
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