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Wynn, Sands shares fall after Macau limits

13 October 2009

LAS VEGAS, Nevada -- Shares of Wynn Resorts Ltd. and Las Vegas Sands Corp. fell in trading Monday following a published report that Macau may be exploring changes in its gambling limits.

The Wall Street Journal, reporting from Hong Kong, said Macau government officials met with the city's six casino operators to discuss limiting the size of casinos and changing the legal gambling age from 18 to 21.

Shares of Wynn Resorts, traded on the Nasdaq National Market, fell $1.94 or 2.86 percent, to close at $65.88. Shares of Las Vegas Sands, which is traded on the New York Stock Exchange, closed $17.72, down 33 cents or 1.83 percent.

Wynn and Sands are the two largest American-based casino operators in Macau. Wynn operates Wynn Macau and is opening the $675 million Encore at Wynn Macau next spring. Las Vegas Sands has three casinos in Macau, including the massive Venetian Macau, which has a 575,000-square-foot casino.

Last week, Wynn began trading on the Hong Kong Stock Exchange following an initial public offering that raised more than $1.6 billion. The news came out after the close of trading on the Asian market Monday.

MGM Mirage, which operates the MGM Grand Macau, closed at $12.08 on the New York Stock Exchange, down 19 cents or 1.55 percent.

The Macau government, in a statement, said the six casino operators agreed officials would prevent "unlimited expansion" of Macau's gaming sector. The government may review the number of table games operating in Macau, 4,390 as off earlier this year.

Francis Tam, Macau's secretary for economy and finance, on Monday told representatives of the six operators that the government was also seeking to raise the entry-age limit for casinos to 21 from the current limit of 18.

Macau's government also said it would ban slot machines from residential areas of Macau. The city itself has about 13,500 slot machines. The slot-machine regulations would be drawn up in the next two to three months, the government said, while the new age limit would require approval by Macau's Legislature.

"Our main policy is that economic growth has to be diversified, and anytime there is a conflict, then the gambling industry has to be regulated," Tam said in televised remarks. "This is the government's strong belief."

Susquehanna Financial Group gaming analyst Robert LaFleur thought investors might have overreacted to the news out of Macau. He said the limitation seemed to pertain more toward limiting slot parlors in residential areas.

"We think this afternoon's sell-off on these headlines is an unwarranted overreaction," LaFleur told investors. "The government's primary concern appears to be distortions in the labor market caused by gaming's rapid expansion. This report does not appear to present any threat to the current operators."

Macau's gambling market experienced booming growth earlier this decade, because the former Portuguese colony is the only place in China where casinos are legal. Monday's meeting underscores the considerable policy uncertainties involved in doing business there.

In September 2008, visitor arrivals and gaming revenue fell after the Beijing government began restricting visas for mainland Chinese traveling to Macau. Although the central government and provincial officials have been silent on the issue, the move was interpreted as a sign of unease by Chinese officials about Macau's quick growth.

In March, Macau's gross gaming revenue fell 5.9 percent from a year earlier. Meanwhile, financial trouble in the United States forced Las Vegas Sands to halt construction projects at the Cotai Strip nearly a year ago. Hong Kong-based Galaxy Entertainment delayed opening its new Cotai casino until late next year.

Growth has resumed, however. Macau's gambling revenue in August reached a record.