Changes in Macau Shouldn't Affect Wynn or Las Vegas Sands

Macau’s VIP market is estimated to account for a whopping two-thirds of the Chinese city’s gambling revenue. So with a new agreement among Macau junkets - the people who deliver high-rollers to casinos and also often provide gamblers with liquidity - operators there may see a shift in market share, according to Goldman Sachs’ Steven Kent.

The deal between AMA International and Melco PBL Entertainment Ltd. (MPEL) should bring more VIPs to Melco’s Crown Macau property, the analyst told clients in a note.

While it may be too soon to quantify the impact this will have on the VIP operations of Wynn Resorts Ltd.(WYNN) and Las Vegas Sands Corp.(LVS), Mr. Kent noted that both Wynn and Las Vegas Sands have been able to withstand the pressure for more working capital and higher commissions from junkets given that their properties are more unique, and they offer better growth prospects.

“Wynn and LVS properties have amenities beyond just gambling and we suspect many gamblers would rather go to these facilities,” Mr. Kent said, adding that the junket issue appears to come down to how much customers care about being able to visit any casino they please.

MPEL vs. WYNN vs. LVS 1-yr chart: