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Macau casinos sluggish but the worst may be over

Fri, May 3, 8:44am by Staff Writer

The revenue for Macau casinos fell the most it has in about three years as China’s sluggish economy continued its chilling effect on high-end customers.

Analysts believe the worlds largest gaming hub has seen the worst of the recent slowdown though, according to the South China Morning Post.

Gross gaming revenue for Macau casino operators was US$2.9 billion in April, down 8.3 per cent from a year earlier, according to data from the Gaming Inspection and Coordination Bureau.

That was roughly in line with a median analyst estimate calling for an eight per cent decline.

April’s result, which is far below the double-digit growth seen at this time last year, shows China’s economic slowdown continues to take a toll on casino operators, as the mainland provides more than two-thirds of Macau’s visitors.

Gaming revenue has stagnated in 2019, ending more than a two-year hot streak.

The softening trend is expected to ease amid signs that the world’s second largest economy is stabilising.

Analysts predict gaming revenue will grow two per cent in May, followed by further momentum in the second half as a recovering credit cycle and stronger mass tourism bring in more gamblers.

Although business from high rollers remains weak, the pullback has not been as bad as feared.

At the same time, the mass market segment, which contributes a smaller portion of overall revenue, has been showing surprising strength and may become a bigger driver of growth.

Macau casino stocks have been rallying in the face of anaemic revenue growth, amid a more optimistic outlook.

The Bloomberg Intelligence Index of Macau casino stocks rose 11 per cent in April, extending this year’s gains to 29 per cent.

The best performer for April was Wynn Macau, with a 22 per cent gain.

MGM China Holdings’ shares performed the worst, losing 1.6 per cent.

VIP high rollers still attractive to casinos

Australia’s top casinos are in a tug of war to lure back wealth Asian high-roller gamblers.

Sydney Morning Herald is reporting that the casinos are persisting with gamblers from Asia despite China’s economic slowdown but analysts are now “optimistic” about the chances of a recovery in the next financial year.

As China recorded its slowest rate of growth in nearly three decades, partly driven by trade tensions with the United States, Australian casino giants including Star Entertainment and the James Packer-backed Crown Resorts have experienced a sharp pullback in turnover by super rich Chinese tourists, denting profits.

Crown told its investors in February that turnover from its VIP program had shrunk 12.2 per cent to $19.9 billion, driving down company profits over the final six months of 2018.

At Crown’s flagship casino in Melbourne, turnover was down 11.2 per cent to $17.3 billion.

The company’s after-tax profit had risen less than 1 per cent to $194.1 million, short of forecasts by Macquarie Research ($203 million) and JPMorgan ($221 million).

In an effort to determine the strength of the “international VIP market”, industry observers have been monitoring the situation in the southern Chinese territory of Macau, the world’s biggest hub and major destination for punters from mainland China where gambling is illegal.

Despite an overall bearish view on the VIP market, analysts from Macquarie Wealth Management have observed a “U-turn” in mainland Chinese sentiment “which we see flowing into VIP confidence and driving an uptick in volumes.”

“We now include a VIP recovery in financial year 2020. While we remain cautious on [second-half 2019] VIP volumes, with our view that Macau VIP bottoms in the June 2019 quarter, we are optimistic and now forecast a recovery.”

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