Inside Asian Gaming

INSIDE ASIAN GAMING | January 2009 44 Briefs Regional Briefs LVS Favours Singapore Tax ‘Haven’ The logic of Las Vegas Sands Corp.’s decision to mothball its Macau projects and press ahead with its integrated resort Marina Bay Sands in Singapore became clear at a recent investor conference in the US. LVS President and COO William Weidner pointed out that with Singapore’s lower gaming tax burden (10% of the gross on mass market play and 20% on VIP play, as opposed to an effective 40% across the board in Macau) the net earnings generated on projected revenue of US$2 billion in Singapore would amount to $940 million, compared to only $504 million from the equivalent gross in Macau. Mr Weidner added Las Vegas Sands Corp.’s revised business plan envisages the company can complete its Marina Bay Sands project in Singapore with cash to spare, says Business Times Singapore . LVS says it needs US$4 billion to complete its Marina Bay site and that it currently has $6.2 billion in borrowings and liquidity, including income raised or expected from monetisation of non-core assets. “There is cash available to open Singapore [Marina Bay Sands] in the first quarter of 2010,” Mr Weidner told the investor conference in the US. He revealed that LVS expects to cut US$100 million in costs globally in 2009 by reducing expenses, labour, head count and benefits “everywhere that doesn’t affect the customer experience”. Mr Weidner projected that with its 2,600 rooms, and an average daily rate of US$269 per room by 2011, LVS hopes Marina Bay will achieve initial EBITDA (earnings before interest, taxes, depreciation and amortisation) of $161 million. He also forecast rental revenue from its retail component at $179 million. Addressing the issue of debt, Mr Weidner was quoted as saying: “The debt that we have is extraordinarily valuable. No one can generate about $9.8 billion of debt at a blended rate of about five percent in this environment.” He said that the first maturity of this debt is May 2011 for a tranche of approximately US$800 million followed in May 2012 by about $776 million.  Macau 2.0 Macau’s medium-to-long term prospects as a gaming market are undimmed despite the current downturn, says Gary Loveman, chairman and chief executive of Harrah’s. His comments were made to the China Daily newspaper as Harrah’s unveiled its 18-hole Caesar’s Golf Macau facility at Cotai just before Christmas. Harrah’s has reportedly spent HK$200 million upgrading the course. Mr Loveman’s warm words do though raise the question as to why Harrah’s didn’t try harder to get a casino licence the first time around if Macau is indeed as wonderful as he suggests. But in the spirit of New Year goodwill, Inside Asian Gaming will allow Mr Loveman—the owner of probably the world’s most expensive golf course, a 175 acre plot the lease of which was acquired from a Taiwanese entrepreneur in late 2007—his two cents of commentary. “This is the largest and most prosperous gaming destination in the world and we think it will widen its leadership over time,” Mr Loveman stated in another interview to mark the course opening. “The market is likely to go through a maturation to Macau 2.0,”he added prophetically. Exactly what Mr Loveman has in mind for Harrah’s contribution to ‘Macau 2.0’ isn’t entirely clear, though medical tourism and theme parks were apparently referred to in one conversation with journalists. Harrah’s investors would certainly welcome a money-spinning new scheme in Macau, especially if it avoided the need for one of those troublesome gaming licences that can cause such a lot of litigation and heartache for companies. Although Harrah’s has never officially confirmed the price it paid for its golf course, at the time the bill was widely reported as US$575 million, which some wag worked out was US$31.9 million per hole. It is though the second biggest parcel of land on Cotai after that granted to LVS, so the course could potentially be converted to miniature crazy golf at a later date to make way for a higher yield leisure operation. Mr Loveman’s comments about medical tourismand theme parks reminds IAG of what Robert de Niro’s character Sam ‘Ace’ Rothstein says about modern Las Vegas in the 1995 film Casino. “Today it looks like Disneyland. And while the kids play cardboard pirates, mommy and daddy drop the house payments and junior’s college money on the poker slots. “You get a whale show up with four million in a suitcase, and some twenty-five-year-old hotel school kid is gonna want his social security number.” IAG doubts the US government’s Medicare system would pay for the sort of medical tourism potentially on offer at Cotai. And the medical insurance companies would need to be careful not to advance cash to policy holders to pay for treatment, otherwise granny could be forced to wait a bit longer for that hip replacement.  Look East Young Men Marina Bay Sands City of Dreams