Macao smacks down Adelson

So the Chinese government was just bluffing, huh? Talk about taking land back was merely political posturing, was it? Once again, Wall Street and hubristic casino barons alike have been given a sharp reminder just who’s calling the shots over in Red China. Today’s stunner came in the form of a bulletin that Macao had rejected Las Vegas Sands‘ land-grant request for Sites 7 & 8 on the Cotai Strip™. As Wells Fargo gaming analyst Carlo Santarelli wrote, “today’s announcement serves as yet another reminder of the unpredictable nature of policy decisions in Macau, something we believe will be a recurring them in 2011,” as Peking seeks greater oversight of the booming — to put it mildly — Macanese casino industry.

Now, the guvmint may just be doing this for the pleasure of watching Sheldon Adelson squirm. (Or maybe it’s going to turn the land over to favorite son Stanley Ho, who covets Adelson’s acreage) Sands does have 15 days to ask for a review of the decision and a month to appeal it. Luckily for shareholders, Sands has only sunk $102 million into the sites, which would be a pretty modest writeoff by present casino-industry standards. Santarelli opines that MGM Resorts International and Wynn Resorts have little to fear from today’s precedent — and that Sands shareholders are overreacting — but it represents a “distinct positive” for Ho’s Sociedade de Jogos de Macau. I’ll say.

J.P. Morgan sage Joseph Greff, also bullish on Sands stock, takes a wider-lens perspective on today’s events, interpreting them to mean that “the current Macau Chief Executive wants a diversity of casino operators on Cotai (versus LVS having a disproportionately large share of Cotai). It also could signal a preference for non U.S., more local casino operators to build out on Cotai (hard not to think of SJM’s previously publicly communicated interest in developing it). It also could signal that the Macau government would like a more heavily skewed non-gaming facility ( … which is ironic because LVS would likely do exactly that). Lastly, we would not rule out that the government opens up a tender process for Sites 7 & 8, similar to what Singapore did originally.”

Greff goes on to say the he doesn’t detect the fine hand of Peking behind this move  — nor does he think it will be accompanied by any further concessions on the guest-worker issue, which is hindering progress at Venetian Oriental (pictured). In short, he believes “it’s more having to do with a U.S. operator having too much share at the expense of local operators.” Are Macao’s bosses fearful of their city becoming an Adelson “sphere of influence“?

It’s the second swift kick in the pants the Bostonian tycoon has received this week. The good news coming out of Macao in November was that the gambling pie continues to grow, up 42% from last year. The bad news for Sands is that it had a very unlucky month at the tables, pushing its market share of revenue (15%) into third place — behind Wynncore Macau (16%), which enjoyed exceptionally good table hold. Ho-hum, SJM was out front with 32% but the real story may be the growing strength of Melco Crown Entertainment (14%), which continues to nip at Adelson’s heels.

MGM also keeps climbing out of last place, widening its lead to a full percentage point ahead of long-entrenched, dowdy Galaxy Entertainment, bringing up the rear at 10.5% As for Melco, it doesn’t have projects backed up into the next decade, unlike Sands, so much more of its Macanese revenue can go straight to the bottom line, instead of being churned back into the erection of potentially superfluous hotel towers.

Some guys with excellent federal retirement plans want to raise the retirement age and lower Social Security payments for the rest of us. (Same to you, fellas.) I guess I better just plan on working until I die, the way things are going down the Crapo, er, crapper.