SJM & Sands CFOs optimistic about gaming revenue: “Safe forecast” – USD80-100 billion by 2020

2013-5-23

From：Macau Daily Times

The Chief Financial Officers (CFOs) of gaming operators Sands China and SJM (Sociedade de Jogos de Macau) predicted that Macau’s gaming revenue would reach somewhere in the vicinity of USD80b – 100b by 2020. They stressed that Macau’s market is reaching a very small percentage of China’s total population and a lot more Chinese visitors are visiting the city because of more convenient border crossing facilities, efficient transportation infrastructure and the “Hengqin effect” that is expected to greatly favor Macau in terms of land and labor resources.
“If you look at the Macau gaming revenue five years ago, it was about 10 billion [USD] and today, this year it’s going to be more than 40 billion. So the average growth rate is over 25 percent [per annum] in the past five years. We believe this trend will continue,” said Ben Toh, CFO of Sands China. “When people look at Macau, you don’t just compare Macau with Las Vegas, you compare the gaming revenue of Macau with the US [as a whole]. The US today has probably about 60 billion [in gaming revenue]; Macau can easily reach over that. From the penetration standpoint, Macau now only penetrates less than 1.5 percent of China population.”
The CFO said with the rapid construction of more infrastructures including high-speed rail in the Mainland, the population penetration is expected to increase further, creating positive effects on Macau’s gaming sector. “So there’s still a lot of potential…The forecasted revenue for 2020 Macau could be over 100 billion [USD, in gaming revenue],” concluded Ben Toh.
Bob McBain, CFO of SJM, also predicted a robust growth for the gaming industry.  “If you accept that Macau’s gaming revenue will grow at about 12 percent annually, then you will see a doubling in Macau in less than six to seven years…that may be a fairly safe forecast.” The CFO said in order to accommodate the doubling of gaming revenue Macau will need more than twice the current number of hotel rooms.
Toh and McBain were speaking in a panel discussion titled “Show Me The Money: CFO Roundtable”, held during the Global Gaming Expo Asia (G2E Asia 2013) conference taking place at the Venetian Macao. Also speaking at the seminar was Hubert Wang, CFO of MGM China.
But some audience members interrogated the rosy forecast given by the CFOs, and raised the negative impacts that are a  possibility if there was to be a change of national policies in mainland China, for example if gaming was permitted in the country. But the CFOs expressed their reservations towards this possibility “Most of my colleagues would say it’s not happening so far and will not in the future because it’s just contradictory to communist ideology,” said McBain.
Hubert Wang brushed aside possible impacts even if China legalizes gaming. “So what? From the early 1990s, the US started a proliferation of gaming and every state was issuing gaming licenses. Las Vegas was worrying if their revenue would be taken away by these regional gaming facilities. But the result was just the opposite because these regional venues attracted more gamers and the penetration rate as a whole increased. Now they know that Las Vegas is a Mecca of gaming and people are still eager to go there. So what we need to focus on is what we can do for Macau in this industry, instead of worrying about what others will do,” said Wang.
Talking about VIP and mass markets, the financial experts said the penetration rate is far from reaching the full potential, and the premium mass market is an important section for gaming operators to achieve a better EBITA margin and therefore make higher profits.
As positive developments relevant to the gaming industry, the CFOs pointed out that it is getting easier for Mainlanders to reach Macau, and it is reasonable to predict that the border crossing will be operational 24 hours a day in the future. As other regional projects that allow Macau to secure additional visitors and gamers, the speakers stressed that the Hong Kong-Zhuhai-Macau bridge is just years away from its completion, and Hengqin will serve as a great complimentary resource to provide Macau with the additional lands and human resources it needs to expand.

Copyright@Macau Daily Times