Macau’s casino industry is expected to see another year of negative growth in 2015 as Beijing’s anti-graft campaign continues to batter the VIP segment, Standard & Poor’s (S&P) said.
The rating agency revised down its growth forecast for gross gaming revenue to negative 5 to 7 percent, from a previous expectation of up to 5 percent positive growth for this year.
This follows the gaming sector’s first full-year revenue decline of 2.6 percent to 351.5 billion patacas (US$44 billion) since it started keeping records of the data in 2002.
“This [downtrend] is to reflect a more significant impact of China’s anti-corruption campaign and stricter regulatory control on Macau’s gaming industry,” said Sophie Lin, associate of corporate ratings at S&P.
The anti-graft campaign spearheaded by Chinese President Xi Jinping will continue to weigh on the VIP segment, which already saw a 24 percent drop in revenue in the second half of 2014.
Other headwinds include Macau gambling watchdogs’ regulatory measures such as background check on junkets and tighter visa approvals, Lin said.
But the industry is expected to bottom out in the middle of the year and S&P is confident about its outlook over the long term. Gross gaming revenue is likely to drop 15 to 20 percent in the first half, but it may register a single-digit growth in the second half, she said.
“We believe the second half of 2014 and the first half of 2015 represent the trough for the industry,” Lin said. “It will recover gradually in the second half of 2015 on a lower base [in the same period last year] and new capacity from hotels and casinos.”
All the six casino giants are now expanding their territories on the Cotai Strip. Melco Crown Entertainment’s (06883.HK) Studio City, Galaxy Entertainment’s (00027.HK) second phase casino resort and Sands China’s (01928.HK) Parisian are going to be launched this year.
MGM Grand Paradise and Wynn Palace are expected to open next year. Lisboa Palace, which is SJM’s (00880.HK) first footprint on the Cotai Strip, will be launched in 2017.
Joe Poon, associate director for corporate ratings, said the market is not yet saturated and can still accommodate the new projects.
“We still believe the market is healthy, it’s turning towards mass market. The casinos which are opening in the Cotai area are going to focus on mass, anyway. This is going to support the whole market to grow healthily,” Poon said.
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