Signs good for Cotai development

A recent speech by Macau's top government official and subsequent interviews with Chinese media by the special administrative region's political leaders have signaled hope that potential development projects on the Cotai Strip will be allowed to proceed.

A previous policy address by Macau Chief Executive Fernando Chui discussed slowing gaming expansion in the former Portuguese colony, which is the only place in China where gaming is legal.

However, gaming analysts said recent reports from southern China show the slower pace of gaming growth could benefit MGM Resorts International and Wynn Resorts Ltd. The companies have been linked with hotel-casino projects on the Cotai Strip.

"We view this commentary as quite positive for ... Cotai development prospects," Union Gaming Group Principal Bill Lerner told investors.

MGM Resorts and Wynn Resorts now operate properties in the Macau Peninsula region.

Wynn Resorts Chairman Steve Wynn has been open about wanting to develop a hotel-casino on Cotai, describing the project for analysts and investors in recent quarterly earnings calls. He said the resort is in the design phase and the project could open by 2014.

Wynn added that the development would use only 40 acres of his 52-acre site, leaving room for further amenities.

MGM Resorts has been linked to a Cotai Strip site near Wynn's property, but company Chairman Jim Murren has not discussed plans because of the casino operator's pending initial public offering on the Hong Kong Stock Exchange.

The MGM Resorts project would be built in partnership with Hong Kong businesswoman Pansy Ho, the company's 50-50 joint venture partner in the MGM Grand Macau.

Lerner said Francis Tam, Macau's secretary of economy and finance, has said in interviews that the government wants to control gaming industry expansion "to promote orderly and planned growth." Tam was quoted as saying the number of gaming tables should grow at just a 3 percent to 5 percent pace.

That growth rate could help both MGM Resorts and Wynn. Planned openings in 2012 of a Cotai Strip resort by Hong Kong-based Galaxy Entertainment and several properties by Las Vegas Sands Corp. on Cotai could account for that year's growth.

"Our interpretation of Tam's commentary suggests that the government will allow an incremental 700 to 1,200 gaming tables by 2015, the approximate time frame, in our view, by which both MGM Resorts and Wynn Cotai properties would open," Lerner said.

Macau gaming revenues have surged this year, growing 60 percent in the third quarter. The region's 33 casinos are expected to produce $16.6 billion in gaming revenues this year, according to analysts, compared with $14.9 billion in 2009.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871.