With a total area of merely 28.6 square kilometers, Macau astonished the world last year when it overtook Las Vegas to become the world's largest single gaming center.This followed the move by the Macau government to terminate the monopoly status of Sociedade de Jogos de Macau in 2002.
Even though the move was not applauded by Stanley Ho Hung-sun, who owns the gaming conglomerate SJM, it was good news for other gaming players, including Macau Success (0487).
Riding on the opportunities offered by market liberalization, Macau Success went for a back-door listing on the Hong Kong bourse in 2003 by acquiring stakes in a loss-making company called China Development Corp, executive director Hoffman Ma Ho-man recalled.
Despite having "Macau" as part of the company's name, it did not have direct exposure to the fast-growing Macau gaming market. But this will change when Ponte 16, a flagship project it owns and operates, is launched.
It beat other competitors to become SJM's partner in the world's largest gaming center.
Back in the 1990s, Sonny Yeung Hoi-sing, chairman of Macau Success, was already involved in the gaming business in Macau. He was the operator of Golden Palace, a VIP room, in SJM's Casino Lisboa, Ma said.
"As one of the top three VIP room operators and having a good business relationship with SJM, Yeung was invited to be a partner," he added.
Ponte 16 then became the core business for Macau Success.
Initially, it only held 10 percent shares in Po
nte 16, but gradually lifted its stake to 49 percent by December 2006 after several share placements, including a HK$370 million share placement in November 2004; selling 5.6 percent of shares to Joy Idea Investments, a VIP room operator in Macau, as strategic investors in 2006.With the shareholders' structure settled, Ponte 16 is ready to launch its operations.
But the competition is severe.
There are 26 casinos operating in Macau, more than double the 11 casinos in 2002. There are a total of 3,102 gaming tables and 8,234 slot machines, eight times and nine times more than 2002, respectively, according to data from Macau's Gaming Inspection and Coordination Bureau.
While more casinos are in the pipeline, including The Venetian, the second project for Las Vegas Sands, and the MGM Grand Paradise, both of which will both this year, market competition is intensifying.
Analysts generally believe the average net revenue per table will continue to decline in 2007 and 2008.
Morgan Stanley believes a recovery in revenue per table will not happen until 2011, after hitting bottom at US$2,000 (HK$15,600) per table per day, because of the increase in casinos.
Nevertheless, Ma believes their network and know-how in the city is their advantage over the overseas giants.
"The needs and habits of mainland customers is different from that in Las Vegas," Ma said. He believes simply copying the model from Las Vegas will not be successful.
"Gamblers in Macau tend to have a larger bet and show more passion in gaming than those in Las Vegas, which leads to a smaller demand for entertainment shows or quality meals."
Rather than adopting the international Las Vegas style, Ponte 16 will make use of its geographic location to distinguish itself from competitors, Ma added.
Located at the Inner Harbor in the old town, the HK$2.4 billion integrated casino resort will feature a European Riviera theme, building on the atmosphere of the former Portuguese colony.
Ma believes the casino will benefit from the new pier to be built at Inner Harbor, which will have ferry services connected to Zhuhai and two other places in Guangdong. This would help bring in customers as the Gongbei immigration gate, which is connected to Zhuhai, is heavily congested.
"Cotai Strip will develop towards the Las Vegas style, while those casinos on the Macau Peninsula will focus on gamblers or visitors looking for the real Macau experience," he said.
The casino, which will house 150 mass-market gaming tables, 24 VIP tables and 300 slot machines, the 423-room five-star hotel Sofitel Macau@Ponte 16 and a shopping arcade will open in phases. Dates are yet to be announced.
Looking ahead, Ma is optimistic.
"Underpinned by the robust economic growth of China and Asia, the prospects of Macau's gaming market will definitely outpace Las Vegas," he said. "In a market growing at over 20 percent per annum, I am very optimistic about the future."
Eyeing a 6 percent to 10 percent market share in Macau's gaming market by revenue, Ma hopes to recoup the investment on Ponte 16 within three years. He is hoping for an opportunity to develop a second casino project.
Sharon Wong of Standard & Poor's expects net profit of Macau Success to be HK$12 million for the year ended September 30, 2007, the lowest since it listed in 2003, because of the absence of interest income from the King Seiner Palace Promotor loan.
However, she expects its net profit to surge to HK$205 million in fiscal 2008 once the Ponte 16 comes onstream.
