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Travel Restrictions Hamstring Crown Macau

It looks like we're beginning to see how the latest round of visa restrictions on Macau visitation is affecting the bottom line of the casino companies. High roller junket operator AMAX Holdings Ltd. reported a significant decline in rolling chip volume for August 2008, which sent investors scurrying from Macau pure-play Melco Crown Entertainment LTD. (MPEL), AMAX exclusive partner.

Crown Macau's parent company's shares tumbled to a bafflingly low $4.95 on NASDAQ.

I'm curious what kind of recourse the gaming companies have if the Chinese government's clamps start to jeopardize their ability to do business. It's hard to grow a business if you can't water the crops.

It's hard to see much downside to MPEL at $5 a pop.


Comments & Discussion:

I'm glad you raised this issue Chuck. My take on it is that the casinos will need to start looking for customers outside of Guangdong, which includes regions in China such as Shanghai and Taiwan, as well as Taiwan, Japan, Korea, Phillipines, Singapore, Malaysia, India etc.

It is important to note that the visa restrictions are imposed only on visitors from Guangdong province, although these visitors do currently make up more than half the visitors to Macau. MPEL was hit so hard recently because they have almost all of their visitors coming from Guangdong, whereas Venetian (they claim) only has 40% of their visitors from Mainland China. MPEL needs to rely start extending their marketing to attract visitors from outside Guangdong. Right now they are way too exposed to any policy changes such as visa restrictions that can impact visitation from Guangdong.

Hopefully City of Dreams will help diversify their customer base, because Crown Macau Taipa is really reliant on almost a purely Guangdong-based clientele.

Yknow... after thinking about this I've got a completely different POV on this. Will post shortly.

I'm eager to hear what your thoughts are. Also, any update on the call to MPEL reps?

i'm juggling a bunch of other things right now, it'll probably happen in a week or so. they're usually end up delaying stuff repeatedly so don't hold your breath.

You know Chuck, I said the same thing a few thousand shares ago at $10. :)

Uh... me too. Just minus the money part of it.

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