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Howard Stutz

Macau revenue rises for first time in two months

2 December 2008

MACAU, China -- Macau gaming revenues grew 3 percent in November following two straight months of declines.

Since early fall, tightened visa restrictions by the Chinese government have curtailed tourism from residents of neighboring provinces into Macau, the only area in China where casino gambling is legal.

Following a 3 percent decline in October and a 1 percent drop in September, Macau casinos collected gaming revenues of approximately $940 million in November, compared with roughly $920 million in November 2007.

The November 2008 increase was far below the November 2007 increase of 49 percent from the prior year.

"After two months of decline and a tough comparable (from a year ago), 3 percent growth is better than anticipated," Deutsche Bank gaming analyst Bill Lerner said Monday.

Through November, Macau gaming revenues are approximately $12.6 billion, a 36 percent increase over 2007.

Lerner thought the visa restrictions might be lifted early next year. Visitation to Macau was up 8 percent in October and the 10-month tourism figure is up 14.5 percent. November visitation numbers are not available. The visa restrictions do not curtail trips to Macau from Hong Kong.

Macquarie Capital analyst Gary Pinge, who is based in Hong Kong, also thought the Chinese government might ease the visa restrictions.

"We remain positive on the longer-term outlook for Macau's gaming market," Pinge said in a note to investors. "The fact that China had to implement five separate visa restrictions in order to slow Macau's gaming revenue growth should highlight to investors the level of pent-up demand for gaming services from mainland China. Our view remains that mainland China is supportive of Macau over the longer term."

The positive news out of Macau did not help the shares of the three Las Vegas-based casino operators with resorts in China during Monday's 679.95-point Dow Jones industrials decline.

MGM Mirage, operator of the MGM Grand Macau, fell $1.39, or 11.6 percent, on the New York Stock Exchange to close at $10.59.

Las Vegas Sands Corp., which operates The Venetian Macau, Sands Macau and Four Seasons Macau, dropped $1.17, or 22.6 percent, to close at $4 on the New York Stock Exchange. Last month, Las Vegas Sands suspended construction activities on the Coati Strip region of Macau.

Wynn Resorts Ltd., operator of Wynn Macau, fell $5.95, or 14.9 percent, on the Nasdaq National Market to close at $33.87.

"We think weakening Macau revenues are already reflected in the stocks," JP Morgan gaming analyst Joe Greff said.