Asia gaming shines despite China slowdown—analystsBy Stephen Coates
HONG KONG—Macau is still holding all the aces as the world’s casino capital despite a slowdown in the Chinese economy, analysts said ahead of an international gaming expo in the former Portuguese colony.
The three-day Global Gaming Expo Asia is taking place at the Venetian on the Cotai Strip from Tuesday, where two huge casino resorts have opened in the past 12 months and three others are in the pipeline.
The semi-autonomous southern Chinese city – the only place in the country where casino gambling is legal – has boomed over the past decade to dwarf Las Vegas as the gaming capital of the world in terms of revenue.
But growth has fallen from the stunning highs of the past two years, and Macau casino operators have watched their companies’ shares get mauled on the Hong Kong stock exchange since the end of April.
Standard and Poor’s ratings agency last week warned of “medium-term risks” for Asia-Pacific gaming companies, notably those in Macau and Singapore, from new casino supply proposed over the next five years.
It asked whether Chinese players could absorb the thousands of new gaming tables that will come into operation, and concluded that earnings growth will moderate over the next 12 months, while remaining “robust.”
“Given this backdrop, and despite continuing global economic uncertainty, all rated casino operators operating in the region have a stable or positive outlook,” it said.
Macau is in the midst of a second round of casino development, while the rapidly growing gaming market in the Philippines will see four integrated casino resorts open in the coming years, the agency said.
“Major casino developments are also planned for Japan and Taiwan as governments across the region look to share in the tourism and taxation benefits provided by these casino developments,” it said.
US gaming mogul Steve Wynn announced last month he had received the go-ahead to build a new casino in Macau, adding to the 265,000 square feet (24,619 square meters) of gaming space his local unit Wynn Macau already owns.
In late April, Macau’s Galaxy Entertainment Group announced its intention to build the HK$16 billion ($2.1 billion) second phase of its Galaxy Macau integrated resort, ramping up competition in the city.
Meanwhile, economic growth in China eased to 8.1 percent in the first quarter from 9.7 percent a year earlier, hit by falling domestic demand and Europe’s debt woes.
Macau’s gambling revenue soared 42 percent to a record $33.47 billion in 2011, about five to six times higher than the amount that gamblers are thought to have spent on the Las Vegas Strip.
Analysts said China’s slowdown would not have an immediate effect on Macau, where Chinese high-rollers make up the lion’s share of gambling revenues.
CLSA brokerage gaming analyst Richard Huang said Chinese public holidays coupled with the recent opening of the $5-billion Sands Cotai Central mega-resort could make May a “record-breaking month.”
“Demand for gaming is still strong – as shown in the high hotel occupancy of over 90 percent in Macau hotels,” he said.
Analysts said gaming stocks listed in Hong Kong were being hit by profit taking and a more general sell-off in perceived higher risk assets.
But CLSA head of gaming research Aaron Fischer said: “There was some concern that gaming revenues are slowing in Macau… In fact, we think this May will still be an all-time record month.”
Shares in Galaxy Entertainment, Wynn Macau and Sands China have each fallen about 20 percent since the end of April, in a broadly weaker market.
In Galaxy’s case the falls come after it more than tripled earnings in 2011 and, earlier this month, posted first-quarter group revenue of HK$13.2 billion, an increase of 130 percent year on year.
Galaxy is one of six firms licensed to operate casinos in Macau, which was handed back to Beijing in 1999 and enjoys freedoms not allowed on the mainland.
The city’s no-frills gaming scene was monopolized by Hong Kong tycoon Stanley Ho for decades until it opened to foreign competition in 2002.
The G2E Asia Global Gaming Expo is the largest gaming event in Asia, showcasing the latest products, services and technologies in the gaming industry, organizers said.
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