Chips are down at Wynn Macau

PUBLISHED : Thursday, 19 July, 2012, 12:00am
UPDATED : Thursday, 19 July, 2012, 12:00am

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Wynn Macau, the Hong Kong-listed unit of billionaire Steve Wynn's Las Vegas operation, reported a 7.1 per cent drop in second-quarter revenue as a slowing mainland economy makes gamblers more cautious at the gaming table.

Revenue dropped to US$907.6 million from US$976.5 million in the same quarter last year, according to a filing to the Hong Kong stock exchange.

Wynn Macau announced last month that it would invest US$4 billion in a new project on the Cotai Strip, where it lacks a presence. The casino giant now operates a single high-end property, which opened in 2006, on the Macau peninsula but Cotai is fast becoming the city's new gaming mecca.

Growth in the world's top gaming hub slowed to 7.3 per cent in May, the slowest rate since July 2009 in the depths of the global financial crisis. Although the growth rate picked up to 12.2 per cent last month, it is significantly down on the boom experienced in the gaming enclave in the past couple of years.

Last year gaming revenue surged 42 per cent to 268 billion patacas, almost six times that of the Las Vegas Strip, official data showed.

Mainland visitors are the driving force behind Macau's strong growth, accounting for 60 per cent of total passenger traffic. However, the numbers are showing signs of a slowdown. Mainland passenger traffic was 1.27 million in May, 4.2 per cent down on the year-earlier period.

Citigroup estimated last week that monthly casino gross gaming revenue in Macau this month could exceed 25 billion patacas, implying a mere 5 per cent growth year on year.

Wells Fargo has cut its forecast for Macau's gaming industry growth rate in the second half to between 4 and 10 per cent year on year.

Wells Fargo analyst Cameron McKnight also lowered valuation ranges for Las Vegas Sands, which also has a Macau unit, and Wynn Resorts because of slowing Macau market growth and a lacklustre economic outlook in China.

However, Donald Cheng, an analyst at Haitong International Securities, was still upbeat. 'Despite the recent slowdown in gross gaming revenue growth, the outlook is still positive for the gaming industry in Macau in the long run.'

Cheng said the mainland market should be large enough to back the development of gaming in Macau.

Chelsey Tam, an analyst at financial services firm Emperor Securities, expected 15 per cent revenue growth this year.