Star, Crown up more than 50 percent this year
A new report from analysts at Morgan Stanley indicate that Chinese VIPs will continue to patronize Aussie casinos despite concerns over China’s economy and the liquidity of junket operators that provide credit to high rollers. Though the concerns are valid, said the analysts, they think current trading remains “solid” for foreign VIP programs Down Under.
“Our recent industry feedback has allayed some of these concerns, with Chinese hotel/leisure companies reporting minimal impact on current trends and ample junket liquidity after recent consolidation,” equity analyst Monique Rooney said in the report.
“Further feedback suggests that overseas VIP market growth remains very strong relative to Macau—particularly in the Philippines and Cambodia.”
The Sydney Morning Herald noted that shares in Macau casinos have dropped almost 15 percent recently weeks due to more cautious spending by VIPs based on the economy and uncertainty about China-U.S. trade tensions.
VIP patronage of Australian casinos took a big hit in 2016-17, after 19 employees of Crowd Resorts were arrested in Mainland China for illegally promoting gaming there. But that customer base has returned, and Crown, Australia’s largest casino operator, says turnover from its VIP programs has grown almost 55 percent to more than $51 billion in the latest financial year after being cut in half the year before. The Star turned over more than $61 billion in VIP programs in the period, up more than 54 percent.
Macquarie Wealth Management said Crown’s results were “underpinned by the big recovery in VIP volumes” but forecasts lower VIP growth in the 2019 financial year due to a “slowdown” in Macau.
Crown Chief Financial Officer Ken Barton is keeping his expectations in check. “It’s very, very hard to predict from half to half, let alone from year to year, what sort of activity we can expect in VIP. We are cautious that people don’t get ahead of themselves and think that this is some sort of VIP boom that’s occurring.”
Morgan Stanley said “current concerns are being overplayed” and added that the Star, operator of casinos in Sydney, Brisbane and the Gold Coast, is especially well-positioned due to its ties with Hong Kong-based partners Chow Tai Fook and Far East Consortium. Morgan Stanley called Star its “top casino pick.”
