UBS on Gaming: Forecasting Mass Unit Profitability To Catch up with VIP in FY12 (LVS, MPEL, WYNN, MGM)

August 20, 2012 12:42 PM EDT
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UBS on Gaming: Forecasting Mass Unit Profitability To Catch up with VIP in FY12

Analyst, Robin M. Farley, said, "After a substantial VIP unit profit premium over mass since ’06 (100-150% on average ’06-’08, and 30-50% ’09-’11), for the first time we see mass profit per table per day catching up with VIP in ’12. We estimate EBITDA per table per day of $3,200-3,300 for both segments. We also note that in H1’12, only 3 out of 10 properties (Grand Lisboa, StarWorld, and Galaxy Macau) enjoyed higher profitability in VIP relative to mass."

Farley also believes that the physical floor configuration is currently an issue, but may turn into an opportunity.

In conclusion, the UBS analyst said, "...While opportunities exist for Sands (NYSE: LVS) and Melco Crown (Nasdaq: MPEL) in terms of excess VIP capacity, we see WYNN Macau gaming floor being best positioned to redeploy tables between VIP & mass, but Wynn (Nasdaq: WYNN) is still most negatively impacted by our lower VIP market growth rate. This strategy may be less viable for MGM (NYSE: MGM) with relative equilibrium: unit profit for VIP and mass quite similar in H112. For LVS, we are adjusting market share estimate for ramp of Sands Cotai Central but we believe that mass yields may grow rapidly over the next few years, and no other operator has the combination of excess table capacity and floor space to capture the grind segment, as well as increasing ratio of hotel rooms to tables."

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