Casinos hit worst streak ever as graft fight persists

Macau’s casino revenue slumped an eighth straight month in January for the longest losing streak on record, and there are growing expectations the pain will persist another year as China’s clampdown on graft intensifies.
Total gross gaming revenue in the world’s biggest gambling hub fell 17.4 percent to 23.7 billion patacas (USD3 billion) last month, Macau’s Gaming Inspection and Coordination Bureau said yesterday. This compared with the median estimate of a 17 pct decline from seven analysts surveyed by Bloomberg News.
Chinese President Xi Jinping’s anti-corruption drive to catch “tigers and flies” and slowing economic growth means Macau may continue to face shrinking monthly revenue until later this year, when new resorts including from Melco Crown Entertainment Ltd. and Galaxy Entertainment Group Ltd. open. Analysts are predicting weaker takings over the Lunar New Year holiday next month and a bigger drop in 2015 than last year’s 2.6 pct decline.
“In regards to Lunar New Year, we are expecting a very soft holiday period relative to what we’ve seen in previous years,” Union Gaming analyst Grant Govertsen said in an e-mail before the data was released. Gross gaming revenue in February could plunge by as much as 40 pct, making it the biggest monthly decline so far, he added.
Macau’s casinos had raked in an all-time record of 38 billion patacas last February, as mainland tourists flooded the former Portuguese enclave amid the week-long Chinese public holidays to play casino games, including their favorite card game Baccarat. The holiday begins Feb. 18 this year.
January revenue rose 2 pct from the 23.3 billion patacas in December. Analysts had seen January’s improvement over December as a sign that the industry may be out of its free-fall of late last year, including a record year-on-year drop in the final month of 2014 when Xi visited the city.
Macau casino shares were mixed at the close of trading in Hong Kong. Wynn Macau Ltd. rose 0.9 percent, Galaxy Entertainment Group Ltd gained 0.5 pct and MGM China Holdings Ltd. was up 0.1 pct, while SJM Holdings Ltd. lost 1.8 pct, Sands China Ltd. fell 0.9 pct and Melco Crown Entertainment Ltd. declined 0.2 pct. The benchmark Hang Seng Index fell 0.1 pct.
Xi’s crackdowns helped wipe about $73 billion from the market value of Macau’s casinos last year. Casino shares fell for a third straight month in January, with the Bloomberg Intelligence Macau (China) Gaming Market Index dropping 3.7 pct, the longest falling streak since July 2012.
At least nine analysts have cut their Macau gross gaming revenue estimates for 2015 since Jan. 5, according to a Bloomberg News survey, with a median forecast of an 8 pct slump. Their previous median estimate was for the year’s growth to be flat.
Sands China Ltd., the casino operator controlled by billionaire Sheldon Adelson, last week reported fourth-quarter earnings that missed analyst estimates after China’s clampdown deterred high-rollers. The volume of Macau’s VIP junkets during the quarter last year was the lowest since the same period in 2010, Adelson said. Junket operators are the middlemen who bring in high rollers to the casinos and provide loans to gamble with.
Amid the weakening VIP market, Melco Crown is touting a Batman ride among other Hollywood-centric features for its Studio City casino resort on the Cotai strip that will open later this year. Galaxy’s expansion in the same area will recreate New York’s Broadway theater. They’re hoping more mass market tourists will be drawn to the city, amid the government’s push for Macau to diversify from gambling.
Casinos could experience more pain as Macau considers a complete ban on smoking in their gambling halls. The government said it is looking to push for a full smoking ban on all areas at casinos. VIP gambling rooms are currently exempted from the ban. “Potential full-smoking ban could hurt gaming demand by 5 to 6 pct,” JPMorgan Chase & Co. analysts led by D.S. Kim estimated in a note dated Jan. 30.
Other tighter policies to negatively impact casinos included restrictions on the use of UnionPay debit cards in Macau, making it harder for bettors to buy pricey items in yuan that they exchange for patacas needed to gamble. Four Chinese suspects were arrested for illegally using altered UnionPay terminals to obtain cash of about 102 million yuan for clients were arrested, the Macao Daily newspaper reported last week.
Macau has tightened rules for the transit visas issued for Chinese visitors entering, closing a prior loophole used by many high-end players to go to the city more often and stay longer than normally allowed.
Last month, a prominent hotel executive who’s a nephew of casino tycoon and SJM Holdings Ltd. founder Stanley Ho was arrested in the largest bust of a prostitution ring in the city’s history, in a sign that Xi’s crackdown was expanding to include long-tolerated vices. Daryl Loo, Bloomberg

Galaxy tops gaming operators

Galaxy Resorts took first place in Macau’s gaming industry in January with a market share of 22.5 pct, slightly above SJM (22 pct) and Sands China (20 pct). According to Lusa news agency, the fourth position belongs to Melco Crown, with a market share of 14.5 pct, followed by Wynn Macau (10.5 pct) and MGM (slightly above 10 pct).

MGM announces staff bonus payout

MGM Macau announced yesterday a discretionary bonus payout for all non-management team members.
The bonus, which is equivalent to one month’s salary, will be distributed to eligible team members who hold non-­managerial positions in February.
Grant R. Bowie, chief executive officer and executive director of MGM China Holdings Limited, commented, “I would like to thank all the staff for their hard work and dedication. As we prepare for the opening of our Cotai property, we look forward to creating many opportunities for the MGM Macau team to seek promotion and career advancement.”
In addition to the bonus, the gaming operator said that it expects “to roll out other initiatives in making careers at MGM Macau competitive and rewarding.”