Macau’s casino revenue has had its largest decline since the city started monthly records in 2005, as China’s crusade against corruption prompted gamblers to cut back on lavish spending.
Total casino revenue in the world’s biggest gambling hub fell by 23.2 percent to 28 billion patacas (USD3.5 billion) in October, dropping for the fifth straight month, according to Macau’s Gaming Inspection and Coordination Bureau. The 23.2 pct drop announced by the gaming regulator matches with last Friday’s MDT/Lusa report published on the macaudailytimes.com.mo website.
“The revenue will remain very weak for the next few months, we also expect November and December to be down by quite a bit,” said Aaron Fischer, a Hong Kong-based analyst at CLSA Ltd., adding that 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 by 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 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 the Chinese New Year, a popular period for gambling.
Sands China Ltd. fell by 3.3 percent to HKD46.80 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. lost 2.8 percent and SJM Holdings Ltd. declined by 2.3 percent. MGM dropped 0.6 percent.
Macau gaming revenue is expected to keep declining until mid-2015, when casino operators will start opening new properties, Barclays Plc analyst Phoebe Tse wrote in a note yesterday. 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 a 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.
Wynn Resorts Ltd., the casino company founded by billionaire Steve Wynn, reported on October 28 that the revenue climbed by 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 whether we’re in the rainy season or how long it will last, but we’re still very, very bullish in 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 with the authorities’ expectations,” Tam said, adding that he believes the trend “will be maintained for a longer period of time”. MDT/Agencies
Sands China noses past SJM
Data compiled from the gaming operators shows that Sands China, controlled by Sheldon Adelson, and Sociedade de Jogos de Macau (SJM), founded by Stanley Ho, ended October with a market share of roughly 23 pct each, though Sands is nearly half a percentage point ahead of SJM.
Third place goes to Galaxy Resorts, with Hong Kong interests, led by Lui Che-woo, with a share of almost 21.5 pct. Galaxy was top of the board in September.
In the second half of the table comes Melco Crown, where Lawrence Ho, son of Stanley Ho, is one of the shareholders. The company consolidated its position in October with a market share of a fraction over 14 pct, followed by Wynn Resorts, owned by American Steve Wynn, with almost 9 pct. MGM Macau, led by Pansy Ho, one of Stanley Ho’s daughters, came last with a share of just over 8 pct.
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