On hold

2014/10/27

From：Macau Business Daily

Investors are skittish. So it’s wait and see. The next 6-12 months will be telling. Stocks are not at ‘scorched earth’ levels yet, say analysts.

Investors are likely to remain cautious about Macau’s gaming operators for the next 6 to 12 months, as signs of recovery could take longer than expected to appear on the horizon. With October revenues testing new lows this month, casino stocks still have a margin to drop even further.
‘Investors were generally cautious on the next 6-12 months and expressed a view that stocks are not at ‘scorched earth’ levels at which they’d be prepared to buy, nor do they think they are compelling absolute shorts here’, wrote Wells Fargo in a note to clients on Friday, following a meeting with investors ranging from equity to debt to gaming areas.
The current feedback from investors is that the market is still very cautious about Macau in the near term, with conviction running ‘low’. The main driver for the pessimism is China’s economic indicators and Beijing’s policy on corruption and lavish spending.
These two negative factors are likely to last longer than anticipated. China’s economy is growing at less than estimated speed this year and next, something that will affect credit growth in the country and as a consequence Macau gamblers from the mainland. The crackdown on corruption by the Xi Jinping government is also likely to continue for all of 2015, at least.
‘There was plenty of discussion over whether Macau could be ‘weaker for longer’ than consensus views contend, and whether stocks could remain range-bound if weak fundamentals persist into next year’, Wells Fargo said on Friday.
Last week, Francis Tam, Secretary for Economy and Finance, conceded that the recovery of gaming revenues will not happen before the middle of 2015, when new casinos start to open here. In the near term, like this month, Mr. Tam confirmed that the drop in gaming revenues will be higher than in September. That month, revenues went down 11.7 percent. In October, they will probably decline around 20 percent.
But if the difficult year for operators and gaming stocks in 2014 is putting investors in a negative mood, the long term story for Macau remains intact. ‘There’s broad agreement on the longer-term secular story, and investors appreciate our view that Macau could be a US$100 billion market if it reaches 1 percent of Chinese and Hong Kong GDP by 2020’, the US bank said. ‘There were no ‘hardened shorts’ (although they exist) arguing Macau’s recent growth has been driven by excess Chinese liquidity or housing and fixed asset investment,’ Wells Fargo added.

SJM chief confident despite plummeting gaming revenue

When asked to comment on the decline in gaming revenue for the past four months, Ambrose So Shu Fai, chief executive of casino operator SJM Holdings Ltd, said that he was still bullish on the long-term development of the gaming industry in the territory, saying that the completion of infrastructure projects such as the Hong Kong-Macau-Zhuhai Bridge in future will support the growth of the gaming business here.
Mr. So was speaking to Chinese-language media on the sidelines of the 19th Macao International Trade & Investment Fair (MIF) on Friday.
An average daily gaming revenue of about MOP800 million patacas (US$100 million) seen now is sufficient for the operation of the gaming companies here, the SJM boss remarked.
Against the backdrop of a recent continuous decline in gaming revenue, Mr. So said that the construction of SJM’s Cotai project Lisboa Palace had not been affected, noting all was progressing as planned.

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