GGRAsia – Fitch ups estimates on Macau 2015 GGR decline

Fitch ups estimates on Macau 2015 GGR decline

May 18, 2015 Newsdesk Latest News, Macau, Top of the deck

Fitch Ratings Inc has increased its estimate for the 2015 decline in Macau gross gaming revenue (GGR) by seven percentage points.

The rating agency now expects GGR to contract by 29 percent compared to its previous estimate of a 22 percent year-on-year decline.

“Our new forecast, which sees 2015 GGR falling to US$31 billion, assumes daily GGR of MOP650 million [US$81.4 million] to MOP680 million for the balance of the year, with the higher end of the range occurring toward the end of the year,” the agency said in a report announced on Friday.

It added that “a strong rebound in average daily GGR is unlikely during the balance of 2015”.

But it said the possibility of some improvement in the second half took into account Galaxy Entertainment Group Ltd’s opening of the HKD19.6-billion (US$2.5-billion) Galaxy Macau Phase 2 on May 27, and Melco Crown Entertainment Ltd’s majority-owned, US$3.2-billion, Studio City scheme due to launch later in the year.

Fitch said the openings might “drive some incremental, albeit limited, growth”.

Nonetheless the rating house cautioned: “Following our trip to Macau, we are generally more negative on the near- to medium-term prospects of Macau’s gaming market. Several headwinds have come to the forefront that may impede mass-market growth…[including] the potential visitation cap on mainland Chinese residents mentioned by the Secretary for Social Affairs and Culture; a complete smoking ban in Macau’s casinos proposed by the director of the Tobacco Prevention and Control Office; and delays in key transportation infrastructure projects, including the bridge to Hong Kong and the intracity light rail.”

The rating agency said there was “consensus” among Macau casino operators that a full smoking ban in the city’s casinos would hurt revenues.

“Operators are speaking out against the full ban, but most believe that, despite their protests, a full ban will likely pass,” said Fitch.

The rating house added: “Fitch’s long-term positive outlook for Macau remains intact as we continue to believe the APAC [Asia Pacific] region is under penetrated, at least as far as mass market [casino gambling] is concerned. However, it appears that Macau is now in a ‘new normal,’ and it may take several years before the market returns to above US$40 billion in annual gaming revenues.”