Time running out for Sands' casino project
Sands China, which operates four major casinos in Macau, is seeking more time to build a gaming resort in the gambling enclave.
A subsidiary of Las Vegas casino operator Sands Corp, Sands China has yet to break ground on the planned project - called Parcel Three - in Cotai. The government, which granted Sands China the land for the project, set a deadline of April 2013 to complete the development. The company was initially required to complete it by August 2011 but was granted an extension.
A company spokeswoman said Sands China applied for the extension because it needed to complete other projects first and would not have enough time left to finish Parcel Three. 'We have to do things sequentially. We have been focusing on Sands Cotai Central, which is located on Parcels Five and Six. So now, apparently, we can't finish the project on Parcel Three in time,' she said.
Sands Corp said in a filing to the United States Securities and Exchange Commission in May that it planned to seek an extension.
The application comes as growth in gambling revenue slows in the special administrative region.
Macau's gambling revenue has been disappointing for months. Although April saw a 22 per cent rise from a year ago, it was still the lowest growth in two years. In May, growth slowed further to 7.3 per cent.
Macau's gaming revenue rose 42 per cent last year, to nearly six times that of the Las Vegas Strip.
Chelsey Tam, an analyst at financial services firm Emperor Securities, attributed the slowdown in gambling revenue partly to weaker mainland economic growth.
Aaron Fischer, head of consumer and gaming research with CLSA, said: 'Macau is a leveraged play on the Chinese economy, so the recent slowdown in the Chinese economy will definitely have an impact on Macau.'
Sands shares fell 1.95 per cent to close at HK$22.65 yesterday, while the Hang Seng Index dropped 2 per cent. The stock has shed 26 per cent since May. 'Gaming companies are, in fact, trying hard to start construction on their Cotai sites as most of their existing properties are running at near capacity and it's hard for them to grow further without building new casinos,' Fischer said.
Sands' rivals SJM and MGM China are waiting for land grants in Cotai, where they lack a presence.
Sands' Parcel Three is expected to house an integrated resort linked to two of its properties, The Plaza Macao and The Venetian Macao, and may have more than 4,000 hotel rooms.
Union Gaming analyst Grant Govertsen said he expected Sands to get the extension. He also expected casino revenues in Macau to grow 'modestly' in the next few months.
'There are several interesting dynamics going on at the moment,' he said. 'One aspect you have is the macroeconomic situation flagging. At the same time, in mainland China, the government is changing at the end of year. The wealthy VIP customers to Macau at this moment may maintain a low profile to find out who will be in charge after the power reshuffle.'
The year-on-year increase for May in gambling revenue in Macau
- The rate for April was 22 per cent