Inside Asian Gaming

September 2009 | INSIDE ASIAN GAMING 9 2 (2) Sheldon Adelson Chairman and CEO, Las Vegas Sands Corp. What a difference a year makes. Like Icarus, the boy in Greek mythology that flew a little too close to the sun, Mr Adelson saw the wings of his business, Las Vegas Sands Corp., lose an alarming number of feathers in a short space of time. Unlike Icarus, Mr Adelson has been able to keep himself airborne. Not only has Mr Adelson stayed aloft, he has also presided over what amounts to a clearout of executives at the very top level of his organisation—including the high profile departure of Bill Weidner as President and Chief Operating Officer. Now, according to analysts, LVS, along with Las Vegas rival Wynn Resorts, could be poised to raise extra cash on the Hong Kong stock market with an initial public offering of shares in a local unit spun off from the parent—taking advantage of an upward bounce in Asian equity prices. It’s certainly a turnaround from the final quarter of 2008. Then, in the aftermath of the global credit squeeze, the capitalisation of Mr Adelson’s casino operating business second place on our list indicates the question posed by auditors has been answered—at least for the time being. Despite his company’s significant debt burden, his casino operations continue to generate greater annual EBITDA than almost any other gaming company in the world. LVS did experience a slight setback in July when it had to concede that Marina Bay Sands, its integrated resort in Singapore, would not open before the end of 2009 as it had hoped. The company is confident, though, that once open early next year, MBS will supply 40% of LVS’s global annual EBITDA by 2011—which the company has estimated will amount to US$700 million in cash terms. plummeted earthward before recovering and recommencing its upward trajectory. Nevertheless, the fallout from the global panic proved costly. By August this year, LVS stock held only 11% of the value it registered at the beginning of 2008. At the same time, LVS’s debt burden—run up as part of an aggressive expansion programme—was only partly offset by the mothballing of some building work on Cotai. Mr Adelson was not alone in his discomfort. He had plenty of company both inside the Asian gaming sector and beyond. Where Mr Adelson was under more specific pressure was in the warning from his auditors, filed in November with the US Securities & Exchange Commission, that there was some question mark about LVS’s viability as a going concern. That related to whether LVS could meet its debt covenants under the new, tougher trading conditions. While the SEC filing generated a lot of negative publicity for LVS, it shouldn’t be forgotten that in a post-Enron world, US standards on financial disclosure remain some of the toughest in the world. This means US auditors are required to cry wolf earlier and more often than in almost any other jurisdiction in the world. The fact that Mr Adelson remains in 3 (1) Stanley Ho Hung-sun Chairman and Managing Director, Sociedade de Jogos de Macau (SJM) Dr Stanley Ho is the founder not simply of the modern gaming industry in Macau, but also of Macau as a world-ranked tourism destination. In recognition of his achievements, he was presented with a G2E Asia Visionary Award on the first day of G2E Asia 2009, held in June at the CotaiExpo™ convention centre. Dr Ho made his first fortune—outside gaming—before Steve Wynn, number 4 on this year’s list, was even born. Dr Ho also has nearly half a century of experience in serving Macau’s predominantly Chinese gamblers. While that may give him an edge in terms of anticipating the needs and direction of the market, Dr Ho’s advanced age is likely to be an increasingly important factor when it comes to the future of his company. Macau’s most famous entrepreneur will celebrate his 88th birthday in November. He must naturally have given some thought to how his businesses—in particular his casino operating company, Sociedade de Jogos de Macau (SJM) and his general Macau investment vehicle, Sociedade de Turismo e Diversões de Macau (STDM)—will be run after he leaves the stage. The market is likely to focus increasingly on succession issues, given that Dr Ho recently underwent surgery at Hong Kong Adventist Hospital and spent time in intensive care there after reportedly tripping and hurting his head at home. The news sent shares in SJM Holdings, the Hong Kong- listed arm of Dr Ho’s casino empire, falling by as much as 5.5% on the day. Nonetheless, any company led by Dr Ho arguably retains a significant competitive edge against the foreign competition. This is in terms of depth of local contacts, the standing he personally has in government circles and his ability to understand their way of thinking, as well as his ability to think and negotiate strategically so that his business interests extract maximum advantage from the regulatory and political framework of Macau. His insight about the localmarket paidoff in spades in the months before and after the recent global credit crisis. His decision to limit capital expenditure on new infrastructure, to control business overheads aggressively and to focus on effective cross marketing of his properties in an aggressively bullish market at a time when some of his rivals were leveraging themselves to the hilt, proved to be a far sighted and highly resilient business formula. It allowed him to spread his bets and extend his brand coverage across the Macau peninsula—the traditional heartland of the Macau casino industry—at modest, incremental cost with projects such as L’Arc (due to open in September 2009) and Oceanus. Thus far, the strategy has meant that Dr Ho’s casinos managed not only to hold on to last year’s market share based on gross gaming revenues, but also actually to build on it. The alternative market strategy— putting nearly all one’s investment eggs in one capital-intensive integrated resort