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Macau Gambling Revenues Increase Anew

Posted on November 2nd, 2010

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Despite steep competition from an emerging new gambling provider in Asia, Singapore, the Chinese enclave has still continued to rack up sizable profits. In the process, Macau has maintained its position as the world’s largest gambling hub. In fact, during the October Golden Week holiday, tourist arrivals in China surged, causing an income increase of as much as 50 percent for Macau. SJM Holdings Ltd., Sands China Ltd. and the four other casino operators in the former Portuguese colony experienced a noticeable increase in income for the month of October totaling to 18.9 billion patacas, or equivalent to $2.4 billion. This figure is definitely higher compared to last year’s figures, which analysts note was already commendable at 12.6 billion patacas. These figures were reported by the Gaming Inspection and Coordination Bureau of Macau.

Currently, Macau boasts of being the only area in China where casinos are legal. Casino sales here have increased by 59 percent to 152 billion patacas from January to October of this year so far. This momentum can be attributed to the slow recovery of the global economy, which in turn boosted consumer spending. A 10 percent increase is anticipated to happen to the economy of mainland China, which is the source of a majority of visitors to Macau, according to the median forecast of Bloomberg’s survey of 17 economists. Visitor arrivals to Macau increased by 13 percent to 685,000 during the National Day Golden Week of China, which happened from October 1 to 7. The tourism agency of the city said that 70 percent of these visitors came from mainland China. This figure does not include visitors from Hong Kong and Taiwan, which made up more or less 53 percent of the total of visitors from January to September, according to a Bloomberg data compilation.

Before the year 2009 ended, the government of China expressed concern that the amount of money from mainland China going to Macau is alarming. This caused the government to implement stricter visa regulations on its residents who want to go to Macau. With this move, analysts feared that the restrictions would cause declines in revenue for the area. However, income figures from Macau did not suffer, causing visa restrictions to be go back to their original state. Since then, Macau saw its gaming revenue continuously climbing every month. For the first months of 2010, the revenue increase was so dramatic that both the government and casino owners decided to freeze current projects that were not yet being developed for fear of overheating.

Stocks of Macau casino companies have also experienced noticable increases. Sands China, which is a unit of billionaire Sheldon Adelson’s Las Vegas-based company listed in Hong Kong, experienced a 1.2 percent increase of up to HK$17.10 in Hong Kong trading even before the information was made public. Meanwhile, SJM of gambling mogul Stanley Ho is valued at HK$11.88, a 3.1 percent increase. Wynn Macau Ltd. is up 0.7 percent to HK$17.26 while Galaxy Entertainment Group Ltd. was up by 1.6 percent to HK$7.42. Melco International Development Ltd., which includes Australian billionaire James Packer as an investor, advanced 4.3 percent to HK$4.59. Las Vegas Sands Corp. the parent company of Sands China, was already upbeat in its projections last June when it said that the casino revenue of Macau will experience at least a 30 percent increase in the second half.

Aaron Fischer, head of Asian gaming research of CSLA, said that the increase in casino stock values of Melco Crown, Sands China, Wynn Macau and others would continue to increase especially with the news. With the figures for October already out, coupled with a strong equity and real estate market, he said that he may have to revise his earlier estimate for the whole year.

He explained, “There’s a general level of optimism in China that’s translated into an appetite for gaming. At the same time, the individual operators are more willing to extend credit, so people are more willing to play.” This is in relations to middlemen of casinos who invite wealthy patrons to the casinos of Macau which offer better credit terms so that they could attract high rollers, which make up 75 percent of the enclave’s market.