Macau Gaming Revenue Slows with Galaxy in Tow
Stars Casino reports on the drop in earnings for Macau casinos during May 2014. The recently-released figures indicate that gaming revenue increased by 9.3% during May, substantial by many accounts, but significantly lower than the median estimate of 14.5%. The latest figures reflect a growth in revenue in the region of $4.1 billion. The data was released by the GICB (Gaming Inspection and Control Bureau). The drop in revenues in Macau has been described as mildly disappointing, and largely attributed to government-imposed limitations on gaming tables. The gaming industry in Macau enjoyed a 10-year spell of unprecedented economic prosperity. During that time, Macau overtook Las Vegas as the biggest money spinner in the world. Additionally, the government has made it difficult for players to get cash since it has clamped down on unauthorized debit card transactions.
Crunching the Numbers: Galaxy Entertainment
Galaxy Entertainment dropped to HK$60.05 – down 3.1%. This was the single-largest drop since the 8th May 2014. On top of that, SJM Holdings Ltd (880) slid during the morning session on the 9th June and then continued its declines by a further 3.2%. Macau casinos are the only legal Chinese casinos and they are heavily reliant on casino whales for their revenue. It has been reported that high rollers account for an estimated 60% of casino revenue. These types of players typically bet HK$5 million per visit to Macau. In an effort to decrease their reliance on casino whales, Macau casinos have been adding hotel rooms, and other entertainment attractions to reel in more middle-class players. There are several reasons why the VIP players are not spending as much; this is partially attributed to the cooling off of China’s economic growth and various measures being introduced to combat corruption in China.
In spite of the soft figures from May, analysts expect Macau’s economic growth to power ahead during 2014. An estimated growth rate of 14% is likely as the fundamentals of the Macau economy remain solid. This is largely a result of the mass market appeal of Macau. In an effort to prevent over-supply of gaming facilities, the city of Macau has limited the volume of gaming tables. The growth rate has also been limited to a maximum of 3% per annum – this in an effort to keep supply and demand in check and to prevent the closure of existing operations. Figures released by the city reflect that revenues from gaming activity increased by as much as 20% – 102.2 billion patacas during Q1 of 2014. During the first quarter of the year, the Chinese economy grew at a rate of 7.4% – a figure not seen since 2012. StarsCasino.com expects robust growth to continue in Macau, as the global economy continues to perform well on sound fundamentals.
