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Gaming market to ‘grow solidly’: Fitch
Ratings agency Fitch said Macau’s casinos are showing no signs of a slowdown despite China’s economic growth cooling, as the territory cements its role as the world’s biggest gambling hub.
Despite some recent concerns that local casino operators may soon face a tougher revenue environment, Fitch on Friday said it sees “no evidence that tighter credit conditions and slowing growth in China are pressuring Macau gaming demand”.
According to the ratings agency, the latest indication that the territory’s gaming visitation and spending trends remain robust came from Las Vegas Sands (LVS) in its third-quarter earnings release last Thursday. “LVS noted very healthy demand trends, as Macau EBITDA [earnings before interest, taxes, depreciation and amortisation] grew 16 percent despite a negative impact from luck,” it explained.
Through September, Macau gaming revenues were up by 45.9 percent year-on-year, to MOP 194.4 billion.
As reflected in the recent rating upgrades of MGM and Wynn Resorts, Fitch said it “continues to believe that the Macau market will grow solidly, albeit at a decelerating rate, moving into 2012”.
Fitch’s 2012 base case forecast assumes that revenue will grow by 20 percent or more again next year.
Fitch notes several 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.
Nevertheless, the ratings agency admits 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.
Macau’s junkets – also known as VIP room promoters who bring punters to casinos and issue them credit and collect debts – have attracted increasing attention from investors because of worries that their funding channels may have their roots in China’s underground lending market.
“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,” Fitch said.
At the Global Gaming Expo in Las Vegas this month, representatives from local gaming operators said there had been no signs of a slowdown in VIP gaming revenue and stressed that payments from junket operators are still being made in 30 days.
The Macau Government will restrict the rate of gaming table growth to no more than 3 percent per year after 2013 – until the 5,500 table cap is in place.
“This appears to reflect the desire of the authorities to manage Macau growth and overheating risks through the supply side rather than through travel restrictions on the demand side,” Fitch said, adding that “this bodes well for the profitability of existing casino operators.”
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