Inside Asian Gaming

February 2012 | INSIDE ASIAN GAMING 9 Mocha Clubs curtail the activities of local slot parlours— including those run by SJM as well as Mocha. The result of this government discussion is what has been dubbed in some quarters as the ‘half click’ policy— which purports to push slot parlours out of residential areas by stipulating they must be located within a 500-metre radius of a casino, or within an existing commercial buildings. In reality, in tiny Macau—which covers only 29.5 square kilometres and has one of the highest population densities in the world—very few residential areas are more than 500 metres from either a casino or commercial premises. Too close to homes Two venues have failed the ‘half click’ test. They are Mocha Marina Plaza—a venue with around 260 machines in a residential area of Macau peninsula, the downtown area, and SJMHoldings’Yat Yuen Canidrome Slot Lounge, at the territory’s dog racing track. No dates have yet been set for the closures. Union Gaming Research said in a note last June—when shutting Mocha Marina Plaza was first mooted—that the property would probably generate only 1% of the parent company MPEL’s EBITDA in 2012 even if kept open. Union Gaming produced that estimate before the opening of two large new Mocha venues in September last year and January this year. Those two new venues, Mocha Macau Tower and Mocha Casino Golden Dragon, between them account for 40,000 square feet of gaming space—nearly half the Mocha total market-wide—and 560 machines; around a third of the Mocha machines currently in the market (see Table 1 below). The new supply injected into the Mocha portfolio may initially have a dilutive effect in terms of win per machine per day, although Lawrence Ho, Co-Chairman of MPEL, said in a commentary to the group’s fourth quarter and annual results that Mocha Casino Golden Dragon was “one of the best performing clubs in our Mocha portfolio”. The MPEL group adjusted EBITDA for 2011 was US$809.4 million, according to a company filing with the New York Stock Exchange. Let’s assume a conservative growth rate of 15% for MPEL adjusted EBITDA in 2012 (in line with some market- wide predictions). Let’s also assume for a moment that new Mocha supply coming on stream in 3Q 2011 and 1Q 2012 doesn’t Mocha venues in Macau Venue Opening Floor area Current floor % change Slots at Current % change date at opening area (decrease) opening slots (decrease) (sq. ft) (sq. ft) Hotel Royal Sept 03 2,100 8,450 302.4 83 178 114.5 Lan Kwai Fong April 04 6,100 6,700 9.8 214 250 16.8 (formerly Kingsway) Kampek June 04 No data — (100) 260 — (100) (closed Sept 2006) Taipa Square Mar 05 4,560 9,200 101.8 142 150 (5.6) Hotel Sintra Nov 05 5,110 5,000 (2.2) 137 140 Hotel Taipa Jan 06 6,100 6,000 (1.6) 132 130+ — Marina Plaza Dec 06 12,500 10,800 (13.6) 261 300+ 15.0 Mocha Square Oct 07 6,000 3,400 43.3 130 63 (106.3) Mocha Altira Dec 08 N/A 2,950* 100 N/A* 111 N/A* Macau Tower Sept 11 20,000 20,000 — 260 260 — Casino Golden Dragon Jan 12 20,000 20,000 — 300 300 — Total — — 92,500 — 1,582 Sources: MPEL Annual Reports 2006, 2007, 2008, 2010; www.mochaclubs.com ; company press releases, IAG *Altira slots formerly managed directly by MPEL New chapter—Mocha’s new Casino Golden Dragon venue