Inside Asian Gaming

February 2009 | INSIDE ASIAN GAMING 33 W hile most companies are reporting lacklustre revenues as a result of the global economic slowdown, gaming software developer Playtech bucked the trend. The company’s fourth quarter ‘2008 Key Performance Indicators’ report revealed record revenues and growth. Total revenues for the quarter came in at €31.5 million, up 52% from the fourth quarter of 2007. Growth from both its casino and poker business units did almost equally well, up 52% and 48% respectively. Growth for the company was strongest in Asia Pacific, with revenues jumping by 141%. Asia Pacific accounted for 28% of Playtech’s fourth-quarter revenues. Europe was still the source of the majority of the company’s revenues, contributing 66% of the total. Playtech enhanced its European exposure recently when it entered the regulated Italian poker market at the end of December. While the venture was a late fourth-quarter addition, Playtech stated that early results indicate that “the Italian poker network has proven to be significantly revenue enhancing and above management’s expectations.” Another key strategic initiative for Playtech in the fourth quarter involved the formation of a joint venture with online bookmaker William Hill. For its US$250 million investment, Playtech received a 29% share of the newly formed subsidiary, William Hill Online, with the potential for its stake to increase to 32%. Playtech also received a minimum five-year contract to provide poker and casino software to the new venture. Playtech Chief Executive Mor Weizer commentedonthecompany’sfourthquarter performance: “Once again we have enjoyed a successful quarter both operationally and strategically as we continue to grow the business and make the most of the opportunities presenting themselves. We are particularly pleased with how smoothly the integration of the William Hill joint venture has progressed, which bodes well for this important strategic company development. The company has met management’s demanding expectations and we are confident that Playtech will meet its targets for the full year.” Playtech offers its licensees a unique package of games catering to Asian tastes bargaining chip when it comes to convincing existing shareholders to support retrospectively a new share issue, and to convince the money markets of the long term viability of LVS’s capital intensive expansion programme in Asia and North America. Political and business culture in China tends to stress the need for foreign investors to submit themselves to local oversight in return for access to China’s huge markets. LVS’s decision to suspend Cotai plots five and six while pressing full steam ahead with construction at Marina Bay Sands in Singapore, may look to Chinese eyes not so much like a rational allocation of resources in a challenging economic climate, but more like a lack of respect to a host community that feels it has bent over backwards to help a foreign investor. Added to this potentially toxic brewof cultural misunderstanding is a word that has come up quite a lot recently in commentaries on LVS’s current difficulties. That word is‘hubris’, from the Greekmeaning pride or presumption. It may be pure coincidence that‘The Concerned Citizens Action Group’ swung into action in Macau only a week after Mr Weidner pointed out to an investors’ forum in the US that Singapore’s low gaming tax rates (15% on the mass market gross and just 5% on VIP play) meant that LVS could achieve higher net earnings per dollar in the Lion City than it could in Macau (where gaming tax and local contributions to social projects means an effective tax rate of 40% on the gross). Or it could be that in going public with the potential business advantages of Singapore, LVS has shot itself in the foot when it was already limping thanks to the global credit crisis. In its eagerness to present the good news about Singapore to a rattled investor community, LVS may have fallen into a different public relations trap potentially as damaging as analyst scepticism. That trap may be the loss of the support of the Macau business and political class. Feature Bucking the Trend Playtech announces record revenues