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Total casino revenue in the world’s biggest gambling hub fell 23.2 percent to 28 billion patacas ($3.5 billion) in October, dropping for the fifth straight month, according to Macau’s Gaming Inspection and Coordination Bureau. This compared with the median estimate of a 21 percent decline from five analysts surveyed by Bloomberg News.
“The revenue will remain very weak for the next few months, we expect November and December to also be down quite a bit,” said Aaron Fischer, a Hong Kong-based analyst at CLSA Ltd., adding the slump might not hit casinos’ income as badly because most of the drop was from the
VIP segment, which tends to have lower margins.
The previous record drop was in January 2009, when revenue fell 17.1 percent in the aftermath of a global credit crisis. Macau casino slumped for seven months straight from December 2008 to June 2009.
President Xi Jinping’s two-year long campaign on graft has discouraged high-stakes gamblers from ostentatious displays of wealth in Macau, the only place in China where casinos are legal. The month’s data also came off a high base, as October 2013 was the second-best month on record for the city, behind February this year which coincided with Chinese New Year, a popular period for gambling.
Government Scrutiny
Sands China Ltd. (1928) fell 3.3 percent to HK$46.80 at the close of trading in Hong Kong, the worst performer on the benchmark Hang Seng index, which declined 0.3 percent. Wynn Macau Ltd. and Melco Crown Entertainment Ltd. both dropped 3.4 percent, while Galaxy Entertainment Group Ltd. (27) lost 2.8 percent and SJM Holdings Ltd. (880) declined 2.3 percent.Macau gaming revenue is expected to keep declining until mid-2015, when casino operators start opening new properties, Barclays Plc analyst Phoebe Tse wrote in a note today. Full-year revenue should slump by 1 percent, according to Tse, making it the industry’s first annual decline in the city.
Macau recorded the slowest annual growth in casino revenue in 2009 with 9.7 percent gain and it hasn’t seen a yearly decline since the city started records in 2002.
“As the scope, magnitude and length of campaign turns out to be wider, deeper and longer than anticipated, the scrutiny and social pressure from the austerity drive could make it increasingly difficult for one to visit Macau,” JPMorgan analysts including D.S. Kim wrote in an Oct. 29 research report.
“In The Foxholes”
Wynn Resorts Ltd. (WYNN), the casino company founded by billionaire Steve Wynn, reported Oct. 28 that revenue climbed 9 percent at its two casinos on the Las Vegas strip, which helped offset a 5.6 percent drop in its properties owned by Wynn Macau where the company gets more than two-thirds of its sales.“The policy of the central government in being very, very aggressive about what appeared to be a misconduct and corruption of the government has put a lot of the wealthy businessmen in the foxholes,” Wynn said in a teleconference after the results, according to a Bloomberg transcript.
“I don’t know whether it’s a squall or we’re in the rainy season or how long it will last, but we’re still very, very bullish on Macau,” the 72-year-old executive added.
Government finances won’t be hit by falling casino tax revenue even with continued declines next year, said Macau’s Secretary for Economy and Finance Francis Tam in a statement on the Information Bureau’s website.
The industry’s current slowdown “is in line the authorities’ expectations,” Tam said, adding that he believes the trend “will be maintained for a longer period of time”.
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