Harrah’s on Macau course?

Sep 18, 2007 3:55 AM

Harrah’s announcement that it has acquired a golf course in Macau has fueled speculation that the gaming giant might be positioning to build a casino-resort on the Cotai Strip section of Macau.

"This investment reaffirms our commitment to Asia and to the Macau market," said Gary Loveman, chairman, president and CEO of Harrah’s Entertainment. "We are delighted to have a compelling amenity to offer our best customers in one of the most exciting and dynamic markets in the world."

One of the reasons that experts believe the golf course is only a temporary "amenity" is the price Harrah’s paid for the course, about $3 billion.

Moreover, the shares of a potential partner in Macau, Melco PBL, shot up 7 percent last week after analysts speculated that the company could eventually team up with Harrah’s on a Macau casino.

While Harrah’s currently says it plans to keep the site open as a golf course, many industry analysts expect a casino to eventually be built on the property. Harrah’s does not hold any of the six casino licenses in Macau.

As an alternative to holding the license, it could build the property and bring in a management partner. Melco would be likely to receive the management deal, according to a research note published late Wednesday by JPMorgan analyst Harry Curtis.

The golf course site is located across from Macau Studio City development, which Melco also will manage when the project opens in 2009. A deal with Harrah’s could allow Melco to "earn a management fee with zero invested capital," Curtis wrote in his note.

Melco could not be reached for comment.