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Hong Kong company reporting season

Macau gaming revenues rebound as casinos bet on tourists

August’s 1.1pc rise ends two-year losing streak as operators shift focus from VIP high-rollers to recreational gamblers

PUBLISHED : Thursday, 01 September, 2016, 10:55am
UPDATED : Thursday, 01 September, 2016, 10:42pm

Macau’s gaming revenue for August rose slightly, ending a 26-month contraction streak and underscoring the latest signs of revival for the world’s largest gambling hub.

Gross gaming revenue was up 1.1 per cent from a year earlier to 18.8 billion patacas, according to data released by the Macau Gaming Inspection and Coordination Bureau on Thursday. That compares with a year-on-year decline of 4.5 per cent in July.

The first gambling revenue growth since May 2014 marked a much-anticipated bottoming out for Macau, after big-spending VIP punters shunned the former Portuguese colony following Beijing’s drive to root out corruption and curb ostentatious living. Macau is aiming to reshape itself into a destination that appeals to tourists and shoppers as well as high-rollers.

“It is well expected in the sense that summer has always been a good time for Macau casinos as there tends to be a growth in tourist numbers during the holiday seasons,”said Angela Han, a China Merchant Securities analyst.

The rebound comes on the heels of the opening of Wynn Macau’s multibillion dollar luxury resort last month, and as the six major Macau casino operators shift their focus towards tourists and recreational gamblers rather than VIP punters.

Analysts suggested the imminent opening of the mass-market friendly The Parisian project, developed by Sheldon Adelson’s Sands China, may bring more visitors to Macau in the third quarter.

“There are a huge number of hotel rooms in the upcoming The Parisian property, and its mass market positioning is more likely to fuel the tourist number growth in Macau,”Han said

The upbeat data sparked a rally of Macau casino shares with Sands China leaping 6.39 per cent, Wynn Macau gaining 7.22 per cent and Galaxy Entertainment soaring 8.12 per cent by Thursday close.

Meanwhile, Macau gaming operator Melco International Development said Thursday it would pay a special dividend after reporting a more than 90-fold surge in net profit to HK$10.4 billion.

Company chairman Lawrence Ho Yau-lung - also Macau gaming tzar Stanley Ho Hung-sun’s son -attributed the growth mainly to the special gain from a restructuring of the shareholding structure.

The bottom line was also aided by the opening of Studio City, an entertainment resort which Ho said had shown the casino operator’s “dedication to provide a distinctive portfolio of non-gaming, mass market-focused amenities”.

“Going forwards, as Macau’s gaming industry has seemingly bottomed out and started to stabilise, we

remain cautiously positive about its long-term outlook,” Ho said.

While VIP gaming businesses continue to struggle, the interim earnings posted by most Hong Kong-listed Macau gaming concessionaires over the last month indicate that their mass market segments are becoming a sweet spot.

However, market watchers recently questioned how sustainable and substantial the upward trend would be, and how effectively the well-received “if you build it, they will come” philosophy would work in view of subdued economic growth.

It remains a question mark whether this is truly ‘meaningful’ growth
Angela Han, a China Merchant Securities analyst

“It remains a question mark whether this is a truly ‘meaningful’ growth, and the growth for September may be weaker because of a smaller seasonal boost,”Han added.

Gabriel Chan, an analyst with BNP Paribas, projected the growth to be modest given Macau’s tightening regulations on VIP gambling as well as a softening yuan that could curb mainlanders’ spending power.

“We are wary in the near term as these new casinos are likely to drive another round of margin erosion, because of insufficient gaming table allocation...and increasing promotional expenses in the face of heightened competition,” he wrote in a note.

Melco’s shares jumped 8.2 per cent to HK$8.68 on Thursday after the results were announced. The stock has fallen 23 per cent in the last 12 months.

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