Macau plays fall on grim outlook
Toh Han Shih
All leading Hong Kong gaming-related stocks declined yesterday after the release of Macau gaming figures for last year and analysts' expectations of a shaky outlook this year.
Galaxy Entertainment Group fell 5.71 per cent to HK$1.32, while Stanley Ho Hung-sun's SJM Holdings dipped 0.61 per cent to HK$1.62. His son Lawrence Ho Yau-lung's Melco International Development dropped 2.83 per cent to HK$2.40 and Shun Tak Holdings, controlled by his daughter, Pansy Ho Chiu-king, fell 3.73 per cent to HK$2.32.
According to Macau's Gaming Inspection and Co-ordination Bureau, although the city's gaming revenue grew 31 per cent to 108.77 billion patacas last year, its fourth-quarter take fell 7.3 per cent from the previous quarter to 24.08 billion patacas, the third consecutive quarter of decline.
'Normally, the fourth quarter is the high season. A decline in the fourth quarter is not good for Macau's gaming sector,' said Credit Suisse analyst Gabriel Chan.
Mr Chan expects a 4 per cent drop in gaming revenue this year, while Deutsche Bank analyst Karen Tang sees an even worse 14 per cent drop, followed by a 6 per cent fall next year.
The last time Macau's gaming revenue declined was in 1999, when it dropped 10 per cent.
For this year, Mr Chan forecast a 15 per cent drop in Macau's VIP gaming revenue and a 10 per cent rise in mass gaming revenue, while Ms Tang forecast a 25 per cent drop in VIP revenue - the worst result since 1998 - and a 5 per cent rise in mass revenue.
'The drop in VIP gaming is mainly due to the credit crunch. VIP operators don't have enough liquidity to supply to high rollers,' Mr Chan said.
VIP gaming accounted for 75 per cent of Macau's gaming market in the third quarter last year, while mass gaming made up 28 per cent and slot machines constituted the rest, Macau government data showed.
Moody's Investors Service yesterday downgraded the corporate family rating and senior unsecured debt rating of Galaxy Casinos to B3 from B1, with a negative outlook. Galaxy Casinos is a subsidiary of Galaxy Entertainment. Both B1 and B3 ratings are below investment grade.
'The downgrade reflects Moody's expectation that Galaxy's credit profile will remain weak in the near to medium term due to lower than expected cash flow in a tough gaming market and the delay in the opening of Galaxy Macau Resort until 2010,' said Moody's analyst Kaven Tsang.
'There is a high likelihood of a further delay. The tightened global credit environment will add uncertainty to Galaxy's fund-raising activities in the near to medium term.'