First new projects since 2012
The recent grand opening of Galaxy Entertainment’s new Cotai resorts were “satisfactory, but not as good as what we expected,” Chairman Lui Che Woo told reporters at the company’s annual general meeting in Hong Kong.
According to Bloomberg News, a number of industry analysts have cut revenue forecasts in Macau, citing weak results in the beginning of June.
Galaxy Vice Chairman Francis Lui said Phase II’s performance “will be better in the next one to two months.”
“Be patient,” he told an anxious industry. “We believe the scale, facilities and services of the second phase are the best.”
Despite the opening of Phase II and Broadway Macau, as well as an easier year-on-year comparison, GGR is expected to show another big drop in June, according to the Asia Gaming Brief. UBS analysts said the numbers will range from 32 percent to 37 percent year-on-year for the month.
Anthony Wong and Angus Chan of UBS wrote that the junket segment is “clearly still sequentially weakening, and mass segment is not showing enough signs of stabilization yet.
“No pickup in demand by July-August would be disappointing,” they wrote. Sterne Agee analyst David Bain predicts a 39 percent drop for the month.
The city’s Economic Intelligence Unit says the local economy will grow again, possibly more than 5 percent in 2016, according to the Macau Daily Times. The territory posted record growth of 10.7 percent in 2013, followed by minus 0.4 percent in 2014. The EIU report forecasts a decrease of 6.0 percent for this year and a return to growth the following year.
The Macau government recorded a fiscal surplus of 25.28 billion patacas (about $US 3.2 billion) in the first five months of this year, down by 54.9 percent year-on-year, according to the latest figures released by the Financial Services Bureau.
Because June is a slow month, the analysts say the true impact of the Galaxy openings cannot be assessed until July and August. “We think no meaningful pick up in revenue by then could trigger another round of expectations revisions,” wrote Wong and Chang.
A Forbes report pointed out that the Cotai Strip isn’t pedestrian-friendly now, but may be when more resorts open. “These big box resorts occupy huge swathes of land, and their footprints with limited entrances aren’t welcoming for pedestrian traffic,” the report said. “New resorts will create more opportunities for traveling by foot between casinos—Melco Crown’s Studio City will be next to Sands China’s Parisian, which will undoubtedly be connected to the Venetian/Plaza complex, which is linked by footbridge to Sands Cotai Central, just a short pop across the street from Melco Crown’s flagship City of Dreams—while the Wynn Cotai and SJM’s Palace will spread Cotai well off its central strip.” A long-stalled light rail system, when and if it opens, also will help.
Credit Suisse analysts Kenneth Fong and Isis Wong wrote that they see “some green shoots” of recovery in the recent numbers. “While it is hard to call for a bottom just by one month of data, the underlying trends are encouraging.”
And Union Gaming analysts Grant Govertsen and Felicity Chang say a four-month trend in the MOP19 billion to MOP21 billion range “suggests a new baseline has been established and we aren’t expecting further material downside from here.”
The Japanese brokerage Nomura said it would be a “warning” to the industry if monthly casino revenue in the city dips much below MOP18 billion (US$2.25 billion).
“There is a general lack of confidence, with casino concessionaires reluctant to predict where the market is heading, given the recent slowdown is largely policy driven,” said Nomura’s Richard Huang and Stella Xing.
“With the anti-graft campaign and increased difficulty in conducting large-sum cross-border transactions, there seems to be no recovery in sight for high-end gaming with some operators suggesting that there could be more VIP room closures to come,” they said.
