Macau casinos’ setback is seen as short-term

Macau casinos’ setback is seen as short-term

Total gross gaming revenue in January fell 17.4 percent from a year earlier to 23.8 billion patacas ($3 billion). Macau’s gambling revenue plunged a record 30.5 percent year-on-year last December. Total revenue fell by 2.6 percent year-on-year in 2014 – the only decline recorded since annual figures were first made public in 2002.

Gross gaming revenue is expected to fall in coming months because of the central government’s anti-corruption efforts and further regulatory tightening in Macau, according to a report of Standard & Poor’s.

The rating agency has revised its growth forecast for Macau’s gross gaming revenue in 2015 to minus 5 per cent to 10 per cent, compared to the earlier projections of up to 5 per cent growth.

“We have lowered our revenue forecast because of the significant impact of Chinese mainland’s anti-corruption campaign and more stringent execution of regulatory controls on gaming activities in Macau than we previously anticipated,” said Standard & Poor’s credit analyst Sophie Lin.

Casinos could experience more pain as the Macau government is proposing a full smoking ban on all areas in casinos.

Standard & Poor’s estimated that gross gaming revenue across the sector will drop by 15 per cent to 20 per cent in the first half of 2015, compared to an average 16 per cent decline in the previous six months. However, the agency expected revenue to grow by a mid-to-high single digit in the second half of 2015. This modest recovery comes off a low base, and factors in new gaming capacity and additional hotel rooms, Standard & Poor’s said.

In a report, Barclays expected an 8 per cent year-on-year gross gaming revenue decline in 2015. The bank also estimated a 5 per cent year-on-year growth in the second half on a lower base and the ramping up of new casinos.

Melco Crown is planning to open its Hollywood-centric Studio City casino resort on Macau’s Cotai Strip later this year. Galaxy Entertainment’s two projects, which feature a slew of non-gaming elements, are scheduled to open this May.

Standard & Poor’s said that the structural shift in revenue toward mass-market gaming and non-gaming activities and away from VIP gaming will benefit Macau in the long term.

Increasingly diversified growth will make Macau’s gaming industry more sustainable and resilient. The gaming industry still has ample room to grow, given robust growth in mainland visitation numbers and high hotel occupancy rates, the agency said.

“We still view the long-term growth potential of the gaming sector in Macau as good. Demand should remain firm, thanks to the mainland’s healthy economic growth and its growing middle-class. Improving transportation connecting Macau to the mainland provides additional support for the industry,” said Standard & Poor’s credit analyst Joe Poon.

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