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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Macau gaming revenue dips for the 17th straight month

3 November 2015

Macau's casino market saw gaming revenue dip for the 17th straight month during October, despite the opening of a multibillion dollar hotel-casino and the lucrative Golden Week holiday.

The good news?

The 28.4 percent decline snapped an eight-month winless streak by Macau casino operators of 30 percent or higher gaming revenue decreases, including an all-time record drop of 49 percent in February.

For the record, Macau's Gaming Inspection and Coordination Bureau said Monday the region's 36 large and small casinos produced $2.5 billion in gaming revenue in October, which included five days of revenue from Melco-Crown's newly opened $3.2 billion Macau Studio City complex.

Through October, Macau gaming revenue is down 35.5 percent for the year, following 2014's 2.6 percent decline, the first annual decrease reported by the market ever since casino gaming was expanded in 2003.

"October came in slightly weaker than we had anticipated," said Deutsche Bank gaming analyst Carlo Santarelli.

Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International operate casinos in Macau and are building new resorts.

Macau has been in a free-fall since last year, primarily because of the Chinese government's crackdown on corruption that ensnared operators of junket businesses tasked with bringing high-end gamblers to Macau casinos' private gambling salons. In October, the Chinese government indicated it would help boost Macau's economy but didn't offer any details.

"We continue to see a bifurcated Macau market, with mass market gaming volumes stabilizing, aided by a modest improvement in overall visitation, and VIP market pressures persisting," Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors.

The opening of Studio City was viewed as a possible boost the Macau's prospects, but the early returns haven't been promising.

Moody's downgraded its view of Studio City's debt after the Macau government allocated half of the number of gaming tables the casino's operators had requested.

"The revision in the outlook reflects Moody's concerns that a lower-than-expected allocation will restrain the company's ability to generate cash flow, which will in turn weaken its liquidity and delay its process of deleverage," Kaven Tsang, Moody's Hong Kong-based analyst said in a statement.

Wall Street is also watching the performance of Studio City and how it foreshadows the opening of the resorts being built by the Nevada-based companies.

Last month, Wynn Resorts Chairman Steve Wynn criticized the Macau government during his quarterly earnings conference call because the company had not yet been told how many gaming tables it would receive for the $4.1 billion Wynn Palace, which opens at the end of March.

Wells Fargo Securities gaming analyst Cameron McKnight said it was unclear how the troubled Macau market will react to the openings next year of Wynn Palace, followed by Las Vegas Sands' $2.7 billion The Parisian Macao and the $2.9 billion MGM Cotai.

"In our view, early results at Studio City will be a key catalyst for the group, and likely a lightning rod for (investors)," McKnight said "We believe the extent to which Studio City can grow the market will be a key driver for stocks."

McKnight said he didn't believe the new resorts will grow Macau.

"Demand is the bigger problem, not supply, and we continue to believe the Macau market has not yet stabilized, he said.
Macau gaming revenue dips for the 17th straight month is republished from Online.CasinoCity.com.