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Macau Continues to Reap Profits Amidst Overly Optimistic Projections

Posted on September 6th, 2010

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For years, Macau has held its reputation as the gambling hub of the world, despite not being as high profile or glitzy as other gaming sites such as Monte Carlo, Las Vegas and Atlantic City. But with the ongoing global economic recession affecting almost every industry, most gambling hotspots, especially those in the United States, have suffered quite a bit, which means a lot of jobs have been lost and a huge cutback on revenues that were supposed to be funneled to the government. This though is not the case in Macau. The Chinese enclave reported an increase of 40 percent in income, that is $2 billion in August after the more established industry players, including SJM Holdings Ltd and its competitors added tables specifically for their high roller clients. Six operators of casinos in this former Portuguese colony reported revenues of up to 11.79 billion patacas, which translates to a 63 percent growth for the first eight months of the year from figures last year, according to the Gaming Inspection and Coordination Bureau of Macau.

Among the months surveyed, figures show that the August growth in revenue is the slowest for 2010 and is matched to the forecast made by Aaron Fischer, an analyst of CLSA Ltd. He further concurs that almost all casino operators, including Wynn Macau Ltd., Galaxy Entertainment Group Ltd. had their revenue increased because of boosted betting by VIP gamblers after new baccarat tables were introduced, with the minimum bets at these tables never going down to 10,000 patacas. Jonathan Galaviz, an independent consultant of the casino industry adds, “A slight moderation in the growth momentum of Macau’s gross casino revenue would probably be a healthy thing at this point. A significant real-estate market downturn is likely in China, and its ultimate effect on Macau would be pronounced.”. Another major player, Wynn Macau, which is the Hong Kong branch of Las Vegas-based Wynn Resorts Inc., said revenue coming from its high rolling clients increased to 80 percent compared to the revenues of same period a year ago.

Two other industry players that have posted positive growth are Sands China Ltd., billionaire Sheldon Adelson’s unit of his company based in Las Vegas and listed in Hong Kong , rose 3.2 percent to close at HK$12.42, the highest price of the company’s stock in more than two months. Melco International Development Ltd., which operates Macau casinos in a venture with Crown Ltd., a company owned by Australian billionaire James Packer, is up by 2 percent to HK$3.10. Hong Kong-based analyst Gabriel Chan of Credit Suisse Group AG adds though that this good news may still be a bit lackluster though, compared to the aggressive figures projected by some forecasts in the recent months. Sheldon Adelson, chairman of Las Vegas Sands Corp. had predicted in June that casino sales in the enclave will increase by more than 30 percent in the year’s second half, compared to gambling revenue for the first six months, which increased by 67 percent. Chan remarks that this 30 percent growth for the second half would still be too optimistic.

News across the Pacific has been bolstered by Macau’s gains as Las Vegas Sands shares went up by 3.7 percent to $29.39 on the New York Stock Exchange, which means its climb this year has totaled to 97 percent so far. Wynn Resorts increased by 2.4 percent to $82.57, while Melco Crown Entertainment Ltd. is up by 0.3 percent to $3.91. MGM Resorts International, which has in Macau a venture with Pansy Ho, Stanley Ho’s daughter, rose to 2.7 percent to $9.25. Macau started its reign as the world’s biggest gambling hub starting in 2006, surpassing Las Vegas as soon the Special Administrative Region’s government ended the gambling monopoly of Stanley Ho by allowing foreign operators in their shores. Since then, Ho’s SJM has been joined by Melco Crown, Galaxy Entertainment, Las Vegas Sands, MGM Resorts International and Wynn Resorts to make the enclave the casino capital of the world.