Fitch: Gaming revenues continue to slump in 2016

Rating firm Fitch expects the city’s gaming industry to continue its downward spiral next year, saying gaming revenues may post their third consecutive annual drop due to ‘the tough first-half of 2015 comparison’.
‘Fitch Ratings projects Macau’s gaming revenues to decline by 34 per cent to 35 per cent in 2015 and by roughly 5 per cent in 2016 on top of a 3 per cent decline in 2014,’ the firm forecast in its 2016 outlook report on the local gaming industry.
‘Fitch’s 2016 forecast assumes stabilisation in the mass market segment, continued, albeit moderating, declines in the VIP segment and modest growth driven by the new capacity coming online on Cotai,’ the agency explained.
But it added that the forecast for the sector would be downgraded if there are further disruptions related to the junket business, cash transfer mechanisms and policies affecting people travelling to Macau, as well as the implementation of a universal smoking ban.
The official data of the Gaming Inspection and Co-ordination Bureau shows that the accumulated gross gaming revenue for the first eleven months of 2015 was MOP212.50 billion, down 35.3 per cent from one year ago.
Although more casino resorts are slated to open next year the rating agency believes that these new projects will not translate into immediate positive effects on the local gaming market. ‘Fitch believes it will take two to three years for Cotai projects to show their full potential and the first full year returns on investment will be disappointing by historical standards,’ it claimed.
Positive in long term
For the long term, the firm said its positive outlook for the city remains intact as the Asia Pacific gaming market remains underpenetrated in general.
‘Pending infrastructure projects such as the bridge to Hong Kong and the light rail project, despite delays, should make Macau more accessible.
Operators’ balance sheets are generally in good shape and can withstand near-term underperformance of their new projects and cannibalisation from competitors’ projects,’ the agency reported.
“Investors in Macau’s gaming sector are playing the long game. As Macau’s gaming revenues begin to stabilise next year, we’re starting to see its long-term potential on the horizon,” said the firm’s director of Gaming, Lodging and Leisure, Alex Bumazhny.
But the firm indicated that the prospects for the city’s major industry will remain dependent upon the central government’s travel policies and corruption crackdown, as well as the local government’s decision on a universal smoking ban in casinos.
Trend continues
Investment house Wells Fargo also believes that the local gaming market remains in decline, claiming gaming revenues would continue to be weak for the rest of the month.
‘Our preliminary checks on the ground suggest December is off to a slow start. This comes despite new supply growth, including the late October opening of Studio City as we’re hearing foot traffic in the new property is tracking lower than expected,’ the firm’s analysts Cameron McKnight and Robert J. Shore wrote in their latest report on the market.
The two analysts added in the report that the mass gaming market had also reached a new low for the year, saying, ‘We note that despite a lot of hype around resilient grind mass demand, we believe grind mass trends, as evidenced by slot demand, was down 6 per cent year-on-year in November’.
According to Deutsche Bank analyst Carlo Santarelli, the city’s daily gross gaming revenues amounted to HK$530 million (US$66.3 million) for the first six days of this month, which is down 28 per cent compared to some HK$738 million daily for the first eight days of December 2014.
The investment bank estimates that gaming revenues for the last month of the year will total some MOP17.8 billion, representing a decrease of 23.5 per cent compared to the same period last year.