City of Dreaming…

Posted: July 4, 2009 in Uncategorized

City of Dreams’ First Month Performance  VIP Tag

Case analysed by:  Expert IR

Story published by Destination Macau:

CoD trumpeted the fact that VIP rolling-chip volumes were ramping up at US$1.94 billion, with US$730,000 coming in the fourth week, much stronger than the first three weeks. However, there was no getting away from the whacking COD received from its high-rollers. Hold percentage on rolling-chip turnover was just 0.8 per cent.

We have been hearing a persistent rumor that one person in particular took a MOP200 million line of credit and turned it over just enough to get well ahead before cashing in. If true, whichever gaming executive allowed that to happen ought to have his hat handed to him. Altira didn’t really help, either, with a win rate of just 2 per cent on volume of US$2.76 billion.

 

Expert IRPinpoint View by expert IR

June 4, 2009

After one month of the opening of City of Dreams, out there many journalists are already making all sorts of guesses about the new casino mega resort. 

However, it is not too wrong that these nay-sayers thought that City of Dreams is still dreaming away… however, my assessment is as follow:

–  First thing first, I would think that City of Dreams has been holding onto its Mass gaming market relatively well with USD100m topline revenue in its first month of operation.  For sure, I agree that this is far better than what Galaxy StarWorld’s performance.  Galaxy’s current team of casino marketing and senior management is considered the weakest team in the industry, in Macau.  StarWorld is merely saved by its VIP Room Operators profit-sharing business and that is nothing much of a contribution by the current management team at StarWorld.

–  If the VIP gaming win% quoted by Destination Macau is fairly accurate, then I would say that City of Dreams has yet to learn the painful lesson from the Amax-AMA junket aggregator operation.  Such mass volume VIP junket churning would only further dilute casino’s margin and hence, profitability.  Casino ends up retaining much greater risk exposure in the turnover game, just to demonstrate a nice market share figure/percentage.  This mentality will become greatest margin killer for a new startup before it is established in floor efficiency and systems.

–  So, what could City of dreams do to reverse such poor VIP gaming win%?   The fundamental treatment to this problem of hovering at 0.8% win on the non-neg chips turnover is,

            (1)  Set a clear parameter on VIP gaming turnover cycle vis-a-vis non-neg chips buy-in process.  Develop multi-tier front-end rebates or commission payout structures to cap casino’s financial risk exposure.

            (2)  Should be creative enough to also introduce play-time condition for draw down of non-neg chips on exceeding certain credit limits.

            (3)  Introduce higher incentives for minimum turnover achieved on shorter cycles.  e.g. weekly turnover criteria besides monthly performance. 

The rest, I would leave it to the management of City of Dreams.  Let see how they perform for the quarter.

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