ACEME Newswire
For up-to-the-minute news on everything from market futures to new partnerships, from product launches to new appointments and approvals, CEM’s Newswire has the information you’ve been looking for.
Macau Gaming Trends Resilient in Face of Slowing Growth in China
November 1, 2011
CHICAGO--(BUSINESS WIRE)--Despite some recent concerns that casino operators in Macau may soon face a tougher revenue environment, Fitch sees no evidence that tighter credit conditions and slowing growth in China are pressuring Macau gaming demand.
The latest indication that the Chinese-administered territory's gaming visitation and spending trends remain robust came from Las Vegas Sands (LVS), the leading Macau operator, in its third-quarter earnings release yesterday. LVS noted very healthy demand trends, as Macau EBITDA grew 16% despite a negative impact from luck.
As reflected in the recent rating upgrades of MGM and Wynn Resorts, Fitch continues to believe that the Macau market will grow solidly, albeit at a decelerating rate, moving into 2012. Through September, Macau gaming revenues were up by 46% year to date on top of very strong growth thus far in 2011 of 58%. Fitch's 2012 base case forecast assumes that revenue will grow by 20% or more again next year.
The primary risk to the Macau outlook lies in the potential that tighter credit conditions could curtail junket operators' ability to extend credit to players and that a real estate correction in China could negatively affect consumer spending. As yet, major casino operators such as LVS, Wynn, and SJM have indicated that no evidence exists to support the view that visitation levels, spending patterns, or collections are being eroded in any material way.
While it is possible that some smaller, less liquid junket operators may be feeling pressure from reduced credit availability on the mainland, larger players have apparently not been affected as yet.
After Chinese authorities slowed growth of the Macau market through visa restrictions in 2008, additional capacity has been added to the market. In May, the Galaxy Macau opened, and LVS plans to complete the new Sands Cotai Central next year, which will be the last major supply addition due to the government-imposed cap on tables through 2013.
Beyond 2013, supply growth should be constrained, as the government has indicated it is likely to limit table growth to 3% annually. This appears to reflect authorities' desire to manage Macau growth and overheating risks through the supply side rather than through travel restrictions on the demand side. This bodes well for the profitability of existing casino operators.
Robust Macau trends and the strong operating outlook have continued to support good capital market access by gaming operators with Asian properties this year. Strong demand for LVS's upsized $3.7 billion credit facility in September, with participation by 15 Asian banks, points to a continuing appetite for gaming-related credit exposure across the region.
The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article, which may include hyperlinks to companies and current ratings, can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.
Additional information is available on www.fitchratings.com
