Fitch: Gaming revenue to grow 12pct in 2017

Fitch Ratings expects gaming revenue in Macau to grow by 12 percent this year, thanks to equal contribution from VIP and mass-market revenues. According to the report, the year-to-date growth through March has been 13 percent, with February growing 18 percent year-on-year.

Fitch’s 2017 forecast assumes low single-digit range month-to-month sequential growth for the balance of the year, compared to 4 percent average sequential growth since July 2016.

Fitch notes that the forecasted growth rate takes into account tougher year-over-year comparisons in the second-half of 2017, and raises the possibility that the tighter monetary policy and increased real estate restrictions may slow economic growth on the mainland. Fitch added that VIP growth has exceeded expectations, growing 17 percent year-on-year in the first quarter of 2017.

Stronger economic indicators on the mainland – such as players acclimatizing to China’s crackdown initiatives on both corruption and casino marketing by foreign companies based outside Macau – may have contributed to the higher performance.

The VIP gross gaming revenue (GGR) currently has a similar level to that of 2010, leaving plenty of headroom for growth, subject to regulatory and other conditions.

Fitch also expects fixed investments in China, an important driver for VIP gaming, to grow 4.3 percent in 2017, down from 5.7 percent in 2016. Given the nature of the VIP segment (56 pct of GGR in 2017 Q1), the company said its forecast is considered cautious.

As for the mass-market segment, Fitch predicts that it will be driven by healthy consumer spending that should grow by 7.5 percent in 2017 due to greater room capacity in casino resorts, which will encourage longer stays.

Fitch believes the mass-market segment will remain underpenetrated in the Asia-Pacific region in the long term.

The company added that despite delays to major infrastructure projects – such as the HKZM bridge, the Taipa passenger ferry terminal, a rail link to Zhuhai airport and the Light Rail project in Macau – new casino openings on Cotai are performing in line with Fitch’s expectations. Wynn Resorts and Las Vegas Sands produced annualized incremental EBITDA (earnings before interest, tax, depreciation and amortization) of USD100 million and USD200 million, respectively. These figures also account for cannibalization at existing properties.

Fitch expects the incremental benefits of Cotai investments to improve throughout 2017 as the Light Rail and MGM Cotai construction conclude.


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