Operator News
Asia – Union Gaming highlights Okada Manila, Crown and Wynn as Sands’ potential targets
By Phil - 7 May 2020
Union Gaming has highlighted Philippines casino Okada Manila, Australia’s Crown Resorts and Wynn Resorts as being the most likely targets if Las Vegas Sands pursues the merger and acquisition that Chairman and CEO Sheldon Adelson hinted at in the company’s quarterly financial earnings call.
Speaking to investors, Mr. Adelson said: “We are looking to see high quality assets where they are in key markets where it may be cheaper to buy them to build, and you may find something that is attractive and fits into our overall strategy in the long run, and I think we’re going to be very returns focused. We are interested in M&A. I’m not going to give up on developing Integrated Resorts. I’m going to add on to our strategic thinking, strategic priorities that we can acquire because most of the other companies don’t have the balance sheet that we do, and they don’t have the potential market that we do so I’m now taking on the strategy of both acquiring and building and developing. We’ve always said that Asia is the best place for us, if we can find something good in Asia we’d certainly like to do that.”
Union Gaming Analyst John DeCree believes Okada Manila, Crown Resorts and Wynn fit the bill best of ‘being closest to the Asian consumer, and particularly the Chinese consumer.’
He said: “While the Philippines gaming market doesn’t rival Las Vegas or Macau in terms of regulatory maturity and transparency, we think the region possesses many of the same supply-driven attributes that made Macau an attractive investment opportunity 15 years ago. As such, we think the high-quality gaming assets in Manila could be given some serious consideration. Okada Manila tops our list of potential M&A targets in Manila. Now that construction on the final hotel tower of phase I at Okada Manila is nearly complete, the property is ready to reach its potential on the other side of the pandemic.
“We estimate the property could generate around US$300m of EBITDA – which is just big enough to move the needle for LVS on its own. Of the four integrated resorts in and around Entertainment City – the main gaming district of Manila – Okada Manila is the largest and best positioned to take advantage of the favourable gaming trends in the Philippines.”
He added: “It’s easy to see why we think LVS could be interested in acquiring Crown Resorts, which includes a collection of high quality assets in a first world market with a solid Chinese VIP junket business, plenty of owned real estate, and some additional growth/development prospects. The company is under levered and with COVID-19 – trading at a discount to replacement cost.”
“Wynn Resorts makes the most strategic sense for LVS. It would add US$1.6bn of in place EBITDA immediately (normalised for COVID-19), plus cost synergies. It would give LVS 2,700 additional rooms in Macau and a significant increase in exposure to the higher-end premium mass and VIP segments.
“On one hand, this merger would eliminate one US operator in Macau, freeing a concession that could potentially be returned to the government and rebid possibly to a Chinese company.
“While this has its benefits, we hardly suspect the government would be interested in letting Sands China grow its market share from 24 per cent today to nearly 40 per cent post-merger. We believe there could be a work-around to this scenario involving another concessionaire and dividing the Wynn assets among them. Ultimately, we think a full acquisition of the Macau assets seems unlikely, but there could be an opportunity for LVS to keep at least one property (Peninsula) in a three-way trade with the likes of Galaxy perhaps grabbing the second (Cotai).”
