While Las Vegas Sands (NYSE:LVS) has seen strong growth in Macau driven by increased VIP and mass-market gaming activities, it has been a fantastic run for Macau in terms of overall gaming revenues. Macau’s gaming revenues rose 18% to $3.9 billion in August boosted by an increase in the number of Chinese visitors.  China’s Golden Week in October can bring in a lot more tourists to Macau and October might generate record gambling revenues. LVS is poised to benefit from the surge in Macau due to its wide presence and the Cotai operations focused on mass-market gaming.
LVS Will Outperform In Macau
LVS is poised to benefit from the solid growth in Macau as it has established a critical mass with its diverse properties in the region. LVS operates through four properties in Macau as opposed to one each for MGM Resorts (NYSE:MGM) and Wynn Resorts (NASDAQ:WYNN). Moreover, the company’s Cotai operations will bolster its casino business. Cotai is a new casino zone where gaming tables are in short supply in the near-to-medium term and LVS is one of the three casino operators in the region. While Wynn and MGM are also coming up with new resorts in Cotai by 2016, LVS will continue to enjoy higher market share. Moreover, LVS itself is developing a new resort – The Parisian, which will have replicas of Paris landmarks, including a half-scale Eiffel Tower in Cotai. The property will have more than 3,000 rooms and suites, 450 table games and 2,500 slot machines. The Parisian will focus on the middle market mass customer.
Mass-market Gaming Is On A Rise
The mass-market gaming segment is growing at a fast pace in Macau, and it contributes close to 20% to the company’s value according to our estimates. In August, Macau mass-market gambling revenue surged 44% compared to the same period previous year.  The segment generated 57% of all profits from table games in the second quarter this year. While mass-market gaming revenue accounts for less than one-third of gross gaming revenue, it yields significantly higher margins than VIP gaming. The rolling chip play (VIP gamblers) win percentage for LVS was 3% at The Venetian Macau in 2012 as opposed to 30% for non–rolling chip play (mostly non VIPs).  LVS attracted more than 14 million tourists in the second quarter itself. More than two thirds of Macau visitors come from mainland China and the number of Chinese HNIs have more than doubled since 2008.  As the number of HNIs continue to grow, it will generate more business for Macau casinos.Notes:
- Macau gambling revenue up 17.6 percent in August yr/yr, Reuters, Sep 2, 2013 [↩]
- DB confirms Aug mass gaming up 44 pct y-o-y, Macau Daily, Sep 26, 2013 [↩]
- LVS’ SEC Filings [↩]
- Chinese High Net Worth Individuals Shift Wealth Management Focus from Growing to Preserving Assets; Overseas Diversification on the Rise, Finds New China Private Wealth Report, Bain & Company, May 7, 2013 [↩]