Inside Asian Gaming

Av. da Praia Grande, No. 886, Centro Com. “Iat Teng Hou” ﹝南灣一定好商業中心﹞ , Macau. Tel: 715070 n this fifth trip to Macau over the past 2 years we came across dramatically more casino gaming supply in the Macau pipeline than we anticipated. These projects are already in the ground with con- struction or in advanced planning stages. The numbers are astound- ing - we now expect there will be nearly 10,000 tables and 45,000 slots in Macau by 2010. This should be great news for suppliers, including Shuffle Master (SHFL), International Game Technology (IGT) and WMS Gaming (WMS), among others. We remain positive on casino operators with Macau exposure – Las Vegas Sands (LVS),Wynn Resorts (WYNN),and MGMMirage (MGM) – but are incrementally more concerned about the impact that this level of supply may have on returns for new projects and results of existing casinos in the short run. Importantly, the combination of the Individual Visitation Scheme (IVS) and significant transportation infrastructuredevelopment should support casino supply growth of this magnitude over time. However, we wouldn’t be surprised if there were timing issues along the way (i.e. some of the infrastructure needed to grow visitation doesn’t line up perfectly with supply additions). Ultimately though,we believe the Asian Field Notes Prudential Equity Group’s Senior Gaming and Lodging Analyst William J. Lerner recently visited Macau, Singapore, and Tokyo in order to track the impact of new industry developments on US-listed casino operators and gaming equipment suppliers. Mr. Lerner provided Inside Asian Gaming with field notes from his Asian gaming trip outlining his updated thoughts on the region better supply (i.e. LVS, WYNN, MGM) should produce superior returns over the long run. Updated Macau Gaming Supply Data There are currently 19 proper casinos in Macau plus 6 Mocha slot parlors, so 25 in all. We estimate the current gaming table installed base at 1,757. We estimate there are currently 3,805 slot machines and 5,852 hotel rooms. Until our recent visit to Macau we believed there were about 16 to 18 additional gaming projects in the pipeline through 2010. The ac- tual number is 38 additional properties,including new build andmajor expansions – many of which were not widely publicized or well con- cealed (Figure 1). Figure 2 shows the timeline for table, slot, and hotel room expansion through 2010,at which time we estimate there will be 9,845 gaming tables in Macau, 45,445 slot machines, and 41,091 hotel rooms. This represents table growth of 460%, slot machine growth of 1,094%, and hotel room expansion by 602% over the next four years. When gauging incremental risk for casino operators in Macau we would look at the table supply data. When gauging opportunity 13 I Casino Lisboa, Macau