Inside Asian Gaming

January 2009 | INSIDE ASIAN GAMING 45 Briefs Macau gaming developer Melco Crown Entertainment said on Tuesday it expects the Macau market to rebound from a sharp contraction. It is also monitoring expansion opportunities in Taiwan’s emerging casino market. “The worst period for Macau’s tourism industry is probably over,” said Lawrence Ho, co-chairman of Melco Crown Entertainment. The company added it is on track to open its City of Dreams integrated resort on the Cotai strip by early summer. Short term hopes—recently dashed—that Beijing would ease visa restrictions and a global rebound in equities from multi-year lows helped Melco shares rise around 70% in the last three months, though the stock is still down nearly 80% over the last year. “2009 should get gradually better,” Lawrence Ho told reporters in Macau. Mr Ho said 7,000 new jobs would be created in the first phase of the US$2.1 billion City of Dreams on the Cotai Strip. Melco Crown and Wynn are the only two casino operators adding new capacity in Macau over the next 18 months. Mr Ho added Taiwan’s move on Monday to legalise gambling on its offshore islands represented a possible opportunity for Hong Kong-listedMelco, which has a joint venture inMacau with Australia’s James Packer. “We are interested in the [Taiwan gaming] market, but we have to do further studies into the political environment there,” said Mr Ho. “Our main consideration is to check there’s no impact on Macau... the Taiwan market could be very large, yet because it’s not on the [Taiwan] mainland, but an outlying island, we’ll have to study how to set up the infrastructure,” he said. Mr Ho said, however, the tough economic conditions meant bank financing for even a mid-sized resort there would likely remain difficult in the next one or two years. Despite Melco’s bullishness, some analysts still take a dim view of Macau’s gaming prospects in the short term.  eSun Share Issue Blocked The Hong Kong media company eSun, a partner in the Macao Studio City project, has cancelled a share issue after a US investor challenged the move in the Hong Kong courts. San Francisco-based investor Passport Capital won an injunction in late December from Hong Kong’s Court of First Instance The share issue would have raised HK$177 million (US$22.9 million) but was opposed by two funds belonging to Passport Capital that alleged eSun was acting in breach of its fiduciary duty. “The [eSun] board believes that the interim injunction in favour of Passport should not have been granted. The company and its executive directorswill continue vigorously to pursue their respective rights and remedies against Passport at (an) inter parties hearing on Jan. 22 and otherwise,” eSun said in a statement. The statement said the board still believed eSun needed to raise funds to strengthen its capital base and develop the business, adding eSun would consider other options. Passport was ordered by the court to provide a bank guarantee of US$15.5 million to compensate any potential loss to eSun, the media and property group headed by Peter Lam Kin Ngok, or alternatively to cover any damages awarded by the court.  Rolling in the Isles Amax Entertainment Holdings Limited, which has interests in Macau’s VIP junket aggregation market, reported a 564% increase in revenue to HK$300 million in the six months to 30th September 2008. The revenue increase figures are skewed somewhat by the fact that the six-month totals are being compared with an initial performance over three and a half months. Amax only started operations in the Macau market in mid-December 2007. The figures also exclude the final four months of 2008, when Macau’s gaming revenue started to contract. In the relevant six months Amax said it recorded a consolidated net profit of HK$219 million, compared to a loss of HK$51 million in the previous period. The company added that the results were primarily due to the contributions of the junket aggregation business operated by AMA International Limited (AMA) in which Hong Kong-listed Amax has an indirect 80% effective interest. AMA helped Amax grab an 18% share of the Macau VIP market within months by offering a headline grabbing 1.35% commission on rolling chip volume. Rolling chip volume generated by AMA totalled HK$215 billion for the six months ended 30 September 2008, said Amax, including HK$95 billion of rolling chip volume for the three-month period ended 30 September 2008. Amax added that its rolling chip volume for the September 2008 three month period “continued to represent market leading levels of VIP gaming volume achieved at an individual casino in Macau.” Amax conceded though that it expectedperformance in the latter part of 2008 to be weaker than in the first half of 2008, due principally to visa restrictions, explaining the rules had “reduced travel of junket players, including primarily the lower tiers of Amax’s junket players, as well as creating a challenging consumer environment.” The company said it had recently taken steps to enhance its operating and capital structure in order to “more accurately reflect the leverage of its junket aggregation model”. In August, Amax disposed of its non-core, legacy LCD business. Also that month, Amax announced a share premium cancellation to eliminate the company’s previously accumulated losses, with the remaining balance credited to its contributed surplus account. The company said it was relaxed about the expected imposition by the Macau government of a commission cap on rolling chip volume. “We expect that, when effected, the implementation of a commission cap of 1.25% will further clarify Amax’s competitive advantages,” said Brian Cheung, Amax’s chairman.  Macao Studio City