If Wynn Resorts Ltd. is any indication, shares of Sands Macau will be listed on the Hong Kong stock exchange within a couple of weeks. Wynn Macau Ltd. completed its $1.87-billion IPO at the start of the October, 15 days after filing the required disclosure statement.
Macau, a special administrative region of China, is the only place in the county where gambling is legal. The gambling industry there started in 1962 when the government issued a single license to Stanley Ho. The monopoly ended in 2002 and several licenses were handed out. In 2006, the market surpassed Las Vegas as the world's largest gaming market.
Las Vegas Sands' filing with the Hong Kong stock exchange details its current and planned future operations in Macau, both of which are significant. Currently, Las Vegas Sands owns three operating casino resorts--the Venetian Macao, the Sands Macao and the Plaza, which have a combined 3,554 suites and hotel rooms, 1,098 table games, 3,631 slot machines and over 60 different restaurants and food outlets. Sands Macau opened in 2004, followed by the Venetian Macau in 2007 and then the Plaza in 2008. It also owns CotaiArena, Macau's largest entertainment venue and one of the largest convention and exhibition halls in Asia, and one of three major high-speed ferry companies operating between Hong Kong and Macau.
Sands reports that its total net revenues from those operations in 2008 were US$3.05 billion with an adjusted EBITDAR of US$686 million, a 55.3% and 33.4% increase, respectively, over the same period in 2007. Through the first half of this year, its operations produced adjusted EBITDAR of US$337.7 million on total net revenues of US$1.5 billion with. Through the first half of 2008, adjusted EBITDAR was $349.2 million on total net revenue of $1.49 billion. In the third quarter of 2009, revenue at the Venetian Macao fell 5.5% compared to the same year-earlier period while it increased 13% at Sands Macau and jumped 37.8% at the Plaza. Sands China Ltd. calculates adjusted EBITDAR as "profit before interest, income taxes, depreciation and amortization (net of amortization of show production costs), pre-opening expense, development expense, net foreign exchange losses (gains), loss on disposal of property and equipment, corporate expense, land lease expense, share-based compensation and fair value losses (gains) on financial assets at fair value through profit or loss."
The company's next phase of development in Macau is known as the Cotai Strip, where it controls five parcels. The company said it is in the final stages of a draft land concession from the Macau Government for land known as Parcels 5 & 6 in Cotai. The company has plans for a 13-million-square-foot, $4.3-billion integrated resort on the two parcels that would be completed in three phases. After that, it would develop Parcel 3 with an additional 3,900 branded hotel rooms and will be connected to the Plaza and the convention and exhibition hall at The Venetian Macao. Parcels 7 and 8 are expected to contain an integrated resort that would be similar in size and scope to the integrated resort located on Parcels 5 and 6.
"Our ultimate plans for Cotai include five interconnected integrated resorts, which leverage a wide range of branded hotel and resort offerings to attract different segments of the market," the company states in its filing with the Hong Kong stock exchange. "When complete, we expect our Cotai Strip development to contain over 20,000 hotel rooms, approximately 1.6 million square feet of meeting, convention and exhibition space, over two million square feet of retail malls, six theaters and other amenities."
The $2-billion first phase of Parcels 5 and 6 would include 3,700 rooms in two hotel towers [flying Sheraton, Shangri-La and Traders flags], 300,000 square feet of casino area and approximately 1.2 million square feet consisting of retail, entertainment and dining facilities, meeting space and a multi-purpose theater. The first phase also includes the structural work for an adjacent 2,300-room Sheraton hotel tower that would be fit out in the US$190-million second phase along with some of the remaining retail facilities. The US$443-million third phase is slated to include a luxury St. Regis-branded hotel and condo-hotel tower.
"We began construction of Parcels 5 and 6 in 2006 and suspended construction in November 2008 due to the global economic downturn," the company states in its filing with the Hong Kong stock exchange. "We plan to restart construction of Phases I and II with a portion of the proceeds from [the IPO], together with supplemental financing that we are currently seeking to obtain from a group of lenders."
The company said it does not intend to restart construction until such supplemental financing is committed or arranged. When that has been completed, the company estimates it will take 18 months to compete the first phase and an additional six months to complete the second phase hotel tower and an additional 24 months to complete the remaining retail facilities planned for the second phase. As of mid year, Sands had capitalized construction costs of approximately $1.7 billion for the two parcels. If the supplemental financing is obtained, it expects to spend an additional $2.2 million to complete the first two phases.
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