MGM, Planning $975 Mln Macau Casino, Seeks Expansion - Sunday 12th of June 2005

MGM Mirage is looking for more projects in the southern Chinese city of Macau as it prepares to build a $975 million casino hotel in the only place in China where casino gambling is legal, Chairman Terrence Lanni said. We definitely want to build more than one casino in Macau,'' Lanni, 62, said today in Macau. MGM and partner Pansy Ho will open the MGM Grand Macau in mid-2007. The 600-room casino hotel will be located next to another being built by Las Vegas gambling operator Steve Wynn and near the Lisboa hotel casino, owned by billionaire Stanley Ho, Pansy's father.

Macau, which scrapped Stanley Ho's four-decade long gambling monopoly in 2002, beat Atlantic City last year to become the world's second-largest gaming market, helped by a 42 percent surge in visitors, mostly from China. With the anticipated performance in Macau in the next five to 10 years, it's not a question of whether the operators may be over-investing, but rather are they possibly under-investing,'' said Jonathan Galaviz, a partner at Las Vegas-based Galaviz, Ong & Co., which tracks the gaming industry.

The economy in Macau last year expanded a record 28 percent, more than three times the pace of that in nearby Hong Kong, where the lottery, soccer-betting and horse racing are the only gambling allowed. Macau's economy totaled 82.7 billion patacas ($10.3 billion), with gambling expenditures contributing half. Expansion Needed? Singapore, which lifted its ban on casinos in April, is planning two casino resorts. The anticipated competition hasn't kept Las Vegas Sands Corp. Chief Executive Sheldon Adelson, Wynn and other gaming operators from investing in Macau, where gaming revenue may match that of Las Vegas by 2008, Galaviz forecast. Adelson and Regal Hotels International Holdings Ltd. are building the Venetian Macau, his second casino in Macau and bigger than his $240 million Sands Macau that opened in May 2004 in downtown. Wynn Resorts Ltd., the casino company headed by Wynn, last month added a $345 million wing to plans for its casino in Macau due to open next year.

Macau should review its licensing system, Galaviz said in a telephone interview from Singapore. The current system of having only three full concessions and sub-licenses may be limiting investment by the world's largest casino operators, he said. Harrah's Entertainment Inc., set to become the world's biggest casino company when it completes a $6.5 billion purchase of Caesars Entertainment Inc., doesn't have a Macau permit. MGM Mirage is operating under a sub-license from Stanley Ho. Macau can only be the real deal in terms of capital investment if, and only if, it creates a situation where the major international gaming operators can have their own licenses, Galaviz said. Stanley Ho Stanley Ho, who runs 13 of 15 casinos in Macau, said he plans next month to announce another project, to be located on Cotai, a stretch of reclaimed land on which Sands' Adelson seeks to develop a $12 billion Vegas-themed gambling strip.

That project will show the world that we are a little faster than Sands, Stanley Ho said, without elaborating. Stanley Ho, born in 1921, opened his first Macau casino in 1962. Since losing his monopoly, Stanley Ho has teamed up with partners including Kerry Packer's Publishing & Broadcasting Ltd. to meet competition in Macau. The two plan to build a HK$8 billion casino-hotel resort called City of Dreams, their second joint project in the former Portuguese enclave. MGM Grand Macau Pansy Ho said MGM Grand Macau will be financed partly by a $600 million syndicated loan. The companies are in talks with banks for the loan, she said, without identifying any banks. A banker for the financing will be chosen within a month or two, she said. MGM Mirage and Pansy Ho's company will each own half of MGM Grand Macau. She forecast MGM Grand Macau may turn profitable in six years after the project starts operating.

Of the 300 tables set for the casino, half will be reserved for VIP, or high rollers. Last year, high rollers generated 70 percent of $5.1 billion of gaming revenue in Macau, which has a population of less than half a million living on 25.4 square kilometers (10 square miles of land. If you're an investor, you have to be cognizant that because it's a small community, people are very aware of what the investments are,'' said Kim Frisinger, senior executive vice president at Hill & Associates, a Hong Kong-based risk management and business intelligence company. ``You've got to know your partner.'' China Visitors Macau's government forecasts visitors to the city may nearly double to 30 million in 2007, bolstered by visitors from China, where economic growth is boosting personal income.

The number of visitors to Macau from China rose 66 percent to 9.53 million last year, according to Macau's statistics bureau. Chinese personal incomes rose in 2004 as surging Chinese trade pushed the mainland's economic growth to 9.5 percent. Per capita disposable income in China's urban areas, home to a third of the nation's 1.3 billion people, rose 7.7 percent to an inflation-adjusted 9,422 yuan ($1,138) last year. There are a significant number of wealthy people in China,'' MGM's Lanni said. Frankly, there isn't a lot to do.

quote.bloomberg.com

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