Macau Update (MGM, LVS Sands, Melco Gaming)

Great video update to the problems in China/Macau.



Dan Ross
http://www.betterbizbooks.com/

Updated Las Vegas info.

Not sure if everyone is aware of this:

Boyd Gaming Corp. recently postponed work on its $4.8 billion Echelon resort in Las Vegas. The Las Vegas-based company, whose ratings were lowered by Moody's last week, also suspended its annual cash common dividend. They have a steel framed building up and that is all that will be completed for the next 6 to 12 months. Bet Vegas gov’t officials were happy to see that! NOT!

MGM Mirage announced wednesday they weren’t going to give out bonuses & their ratings were cut. Meantime, Kirk Kerkorian sold his Ford stake to protect his majority stake in MGM. Rumor has it that he needs to raise more $$$ to finish the CityCenter project so he’ll put $$$ to work with foreign investors.

Then, wednesday as well, LVS sands says that they need to raise a BOATLOAD of $$$$ ($2 billion) to finish their Macau (Cotai strip) property. Adelson, the CEO, thinks banks over there will be more receptive than U.S. banks. The Cotai Strip project in Macau, due to be completed in 2011, is to include retail malls plus hotels that will be operated by some of the biggest names in hospitality, such as Sheraton, St. Regis, Hilton, Conrad, Shangri-La and Traders.

http://biz.yahoo.com/ap/081022/las_vegas_sands_adelson.html?.v=1

Dan

MGM Not Giving Bonuses this year / Ratings Cut

I've been saying for awhile that Casinos (namely Vegas) were going to be trading down and impacted negatively in a big way ever since I went there in January and to Tahoe in February.

http://betterbizbooks.blogspot.com/2008/04/moreless-freebies-in-2008-from-casinos.html

To me, the rooms were too expensive, the food was too expensive and the freebies/comps. were going down the toilet. I expect a certain level and what I got vs. prior years was same quality and MORE expenive due to high occupancy rates. Given that the consumer was stretched, that the economy was declining, I was cautious about Vegas.

Well, yesterday MGM announced they were unlikely to give performance bonuses due to weak results. Then today their rating got cut and the stock price got pummelled. At the same time, Kirk Kerkorian announced he was going to sell his Ford Stake at a HUGE multibillion loss yesterday. Jim Cramer seems to think it is a defensive move given the decline in MGM stock and Kirk's 50%+ stake in the company. If he needs to raise capital to complete the 4800 hotel room / 2800 condo/hotel room City Center Project he will need to inject capital of his own into the company to maintain that majority ownership.



http://www.cnbc.com/id/27293136/?for=cnbc

As you can see from the stock charts neither have done well and, with things getting worse in the economy, I don't see things picking up anytime soon.



MPEL, for what it is worth, said they have enough cash on hand to finish the first two phases of their ENORMOUS project in Macau, City of Dreams. Their stock continues to languish. MPEL shares have bounced off their lows at $2.30 to close today at $4.15 (nearly a 100% bounce). I am still taking a "wait and see" attitude on MPEL as I don't see the stock price bouncing notably higher if MGM keeps on tanking.

http://biz.yahoo.com/ap/081017/melco_crown_dreams.html?.v=1

Last week a major casino developer announced they were going to stop progress on a casino project in Vegas. Most of the steelwork is done but they still are delaying it by 6 months to a year due to funding concerns and overall concerns re: the economy and filling rooms, etc. When casinos aren't getting finished in Vegas you know things are tough!

Oh, and today Harrahs announced completion of the 6th tower at Caesars Palace and they are finishing up their convention center there as well. Caesars, from what I have been told, is the most expensive casino ($$$ spent developing/renovating) in all of Las Vegas. It is regarded as the PREMIER property in Vegas for Harrahs.

http://biz.yahoo.com/ap/081021/nv_harrah_s_caesars_palace.html?.v=1

Dan Ross
http://www.BetterBizIdeas.com/

Vegas needs a new airport terminal ???

I've been hounding for awhile that Vegas traffic was really going to get hit during this economic downturn. Rooms are more expensive than ever, restaurants aren't cheap and it seems like it takes a miracle to find a blackjack table under $10 on the strip at times.

Anyway, from http://www.thestreet.com/

http://www.thestreet.com/story/10436739/1/airlines-hotels-clash-over-vegas-airport.html?puc=_htmlbooyah

"Las Vegas, a city built for visitors, is ground zero in the airline industry's effort to cut back on marginally profitable flights. But the city's powerful hoteliers are none too happy about the cutbacks. They still want the carriers to finance a new airport terminal, which is needed to support 32,000 additional hotel rooms slated to open by 2012. The timing is unfortunate. Traffic at McCarran International Airport fell 8.6% in July, compared with the same month a year earlier. In fact, traffic has fallen every month this year, except for February, which had the benefit of leap day in 2008. And the airlines aren't finished cutting. "

Oddly enough, I was talking last night with my mother re: her pending trip and she had indicated that Southwest Airlines was cutting one flight (out of two daily) that fly direct to Vegas from where she lives....

Dan Ross
http://www.BetterBizIdeas.com

Vegas going into the Toilet - Another disturbing datapoint

I just got back from Vegas earlier this week and I thought business was off a bit. The tables didn't seem as full, restaurants, pool areas, etc.

Then I find the below info. earlier today:

http://www.lasvegasadvisor.com/whatsnews.cfm#3471

* September 11, 2008 Vegas Visitation Down in July Not since the start of the Iraq War, over five years ago, have visitation levels to Vegas fallen as low as they did in July, according to numbers released yesterday by the Las Vegas Convention & Visitors Authority. Room rates were off 10% from July '07, while visitation was down 5%, as hotel occupancy, hovering around 88%. More conventions were held, but conventioneers curtailed their stays.

* September 10, 2008 NV Down -13% in July Comparison to a very robust July 2007 gives this year's July casino-revenue numbers a difficult act to follow, resulting in declines that are way above average for the year to date. Measured against last year, the state was -13% overall, with Strip slot revenues, table win and baccarat win -8%, 21% and -26%, respectively. Most Clark County jurisdictions experienced very adverse comparisons, with the Boulder Strip and North Las Vegas having the worst of it. By contrast, Reno was only off 1% and the unpredictable South Tahoe area noted an 11% increase. July's numbers mark seven straight months of decline for Nevada casinos. As far as trends go, table and baccarat drop swing back and forth, but slot handle on the Strip is further and further off last year's pace.

Dan Ross
http://www.BetterBizIdeas.com

Things changing in Macau?? WHOA!

Gaming stocks got pounded today, based on the article below, on news that mainland Chinese will only be able to visit the place twice a year vs. currently allowed to visit the island about 6 times or so per year.

http://biz.yahoo.com/rb/080819/casino_stocks.html?.v=1

This clearly has put a ceiling on the expectations surrounding gaming stocks. MGM Mirage (MGM), Las Vegas Sands (Venetian Owners: LVS) & Wynn Resorts (WYNN) got hammered today. Oh, and that really puts a dent on me going into Melco (MPEL), which I mentioned a few days ago. I think I'll be holding off on investing until all the analysts take their EPS estimates down and downward pressure in the shares slow down.

Dan Ross
http://www.betterbizbooks.com/

Melco Update (MPEL)

I discussed Melco on a July 17th posting re: how the stocks were getting DESTROYED. I haven't bought any stock in the company but I am going to when I get some free cash. Long-term type of holding for those with disposable cash and a more speculative risk/reward bent.

2Q EPS out - The stock jumped on HUGE volume.
http://biz.yahoo.com/pz/080814/148633.html

This might be the initial breakout for the stock. HUGE growth in EBITDA, revenue, etc. This is a leveraged company but I like the play on Chinese gaming (Macau) and this is the best pure play. Seems like a good point to be buying shares to me.

Motley Fool also seems to think this stock might double

http://www.fool.com/investing/high-growth/2008/08/14/these-stocks-could-be-your-next-two-bagger.aspx

Definitely worth doing some Due Diligence on....

Dan Ross

http://www.BetterBizIdeas.com/

MPEL (Melco) = Pure Play on China Macau Gambling

This stock is getting destroyed right now.

Rumors about re: some Hong Kong investors getting margin calls and being forced to sell some positions in various stocks like GFRE.OB as well. I am not touching this stock until it stablizes but it has to get tempting at SOME point.....

http://stockcharts.com/charts/gallery.html?mpel

Dan Ross
http://www.BetterBizIdeas.com