Construction delays, mass slowdown the new headwind

2014/8/14

From：Macau Business Daily

After a year of turbulent events for the casino sector in Macau – from crackdowns on illegal money transfers to visa restrictions to arrests of junket operators – the industry has two more to contend with: a slowdown in the mass market and construction delays on the upcoming resorts in Cotai. The flow of new casino openings are expected to double the capacity of Macau’s operators and, hopefully, their revenues and profits.
Union Gaming said yesterday that there’s a discrepancy in sentiment between casino investors and operators, regarding the mass market slowdown in July. The brokerage noted that the massive sell-off of gaming shares right after the news that mass revenues increased ‘only’ 17 percent that month amply demonstrated that. Investors’ panic (stocks went down more than 5 percent for the majority of Macau casinos listed in Hong Kong) did not quite gel with the operators’ attitude. “We don’t think a single casino operator ever expected the mass market to grow north of 30 percent into the back half of 2014, suggesting a wide discrepancy between the sell-side consensus and the industry’, Union Gaming wrote in a note to clients.
The brokerage listed a few factors that are creating extra pressure on mass revenues. First, the segment was more exposed to the negative impact of the World Cup that lasted up to mid-July. The fatigue of Macau’s visitors is also a negative factor because it has been more than two years since anything new appeared in Macau and tourists are spending their money in other destinations on new experiences. The lower-end mass market is also underperforming. Again, for fatigue or economic reasons, factors that are driving down revenues from the mass segment. The surge of a more mass ‘casual’ gambler in Macau could also be a worry to operators here.
Another significant new factor affecting the industry is the construction delays on the new casinos in Cotai. Union Gaming cites examples of Sands China’s Parisian project, whose construction was halted, and the risk of MGM Cotai’s project delaying its opening due to a significant backlog of needed approvals at government level. ‘We believe the prospect of construction delays and the likelihood of phased openings will keep the rumour mill in business over the next two years’, Union Gaming said. ‘The very real prospect of delayed openings therefore adds an additional element of risk’, added the brokerage.

Copyright@Macau Business Daily