Inside Asian Gaming

INSIDE ASIAN GAMING | May 2008 24 Galaxy Results opening in October of a Presidential Suite with private gaming tables. Recovery The result was that StarWorld’s VIP gross bounced back inQ4 2007,providing HK$1.62 billion—a 9.75% gain on the property’s Q3 VIP gross. The performance helped StarWorld’s VIP operation to book HK$6.03 billion in gross revenues in 2007—amounting to more than 75% of StarWorld’s total gaming take for the year of HK$8.01 billion. The StarWorld property in turn accounted for 61% of all group revenue in 2007. It meant that by year end—including contributions from Galaxy’s four CityClubs: Waldo, Rio, President and GrandWaldo—the group was claiming gross gaming revenues of HK$14.74 billion and a Macau market share of 18%, compared to a 13% share in 2006, when StarWorld was operational only from November. Star performer StarWorld on its own contributed around 11.7% of Macau’s 55.76 billion patacas (HK$51.58 billion) in gross VIP revenues for 2007. But then Melco PBL Entertainment (MPEL) threw the cat among the pigeons at the end of Q4 2007 by doing a deal with the A-Max subsidiary AMA International Limited, offering it 1.35% commission on rolling VIP chip sales—up to a third higher than the industry average in Macau at the time—at MPEL’s Crown Macau property. As a result Crown Macau’s share of Group Revenue (in HK$m) 1,554 12% 3,470 27% 8,011 61% StarWorld CityClubs Construction Materials Total Revenue = HK$13,035 million Group EBITDA (in HK$m) StarWorld CityClubs Construction Materials Net Corporate Cost Total EBITDA = HK$1,460 million 1115 76% (49) 219 175 (3)% 15% 12% Summary for FY 2007 VIP gaming business rose steadily from December 2007, accounting for 21% of Macau’s VIP take during February. Crown jewels Gabriel Chan, an analyst for Credit Suisse, said recently he expected AMA International to generate an average of US$6.3 billion in rolling chip turnover per month for Crown Macau in 2008. StarWorld achieved annual turnover of HK$203.5 billion on its VIP business in 2007 on gross gaming revenue of HK$6.03 billion and an average house win of 3%—translating to an average win per table per day of HK$331,000. A key question is whether Galaxy can protect or even build on its VIP turnover and market share in the face of tough competition and before the cavalry—in the form of Galaxy Mega Resort—arrives and starts making its contribution via its casino complex on Cotai in mid-2009. Commissions Galaxy is likely to increase commission rates to junket agents in light of intensifying competition in the VIP market, although Group CFO David Banks indicated the volume gains from doing so could be worth the margin decline. Galaxy is also reportedly building the equivalent of a stockade to protect its VIP business by creating a facility of 100-plus new VIP tables at StarWorld. An announcement about the jumbo- sized facility is expected shortly. David Banks, Group Chief Operating Officer, said of the new VIP tables: “They will probably not be added in the first day but certainly up to 100 in a short period of time.” Consolidation Galaxy is expected to populate these tables by following the MPEL/Crown Macau model and doing a deal with a junket aggregator. Another piece of recent good news for all operators was an announcement in late April by Edmund Ho, Macau’s chief executive, of a moratorium on new gaming projects and licences. Only those already in the building, planning or approval process would be allowed “for the time being” said Mr Ho. Galaxy’s shares jumped 13% on the news, though what Mr Ho’s announcement