Macau operators remain positive despite 40% drop


The combined profit of Macau’s six gaming concessionaires was just over US$3bn for the first half of 2015, down 40pc from just over US$5bn in the same prior-year period. August was the 15th consecutive month of declining revenues as operators pin hopes on a wave of new resorts to transform the world’s leading gaming territory back to positive figures.

Following a decade of unprecedented growth and reinvestment, an anti-corruption draft fuelled by the Chinese government is killing the phenomenal success of Macau. The six casino operators in Macau – Galaxy Entertainment, Melco Crown, MGM China, Sands China, SJM Holdings and Wynn Macau – have each seen a significant downturn in profits.

Macau’s shrinking revenues have weighed down on bottom lines and pressure continues to mount as operators have committed a combined US$20bn to open several new casinos over the next two years. But despite seeing profits reach all-time lows, none of the operators have backed off their plans with the belief that the downturn is temporary.

Galaxy Phase 2 and Broadway Macau became the first of the new developments to open in May and were the first large resorts to open in Macau for three years. Despite Galaxy Entertainment reporting a decrease in profits of 66pc to HK$2bn (US$260m) for the first half of the year, the company remained optimistic on shifting gears toward the mass market.

“With the expansion of Galaxy Macau and the opening of Broadway Macau, [Galaxy] is confident that the mass market focused properties will offer some of the most exciting and diverse amenities in Macau,” commented Galaxy in a statement, “driving customer visitations and ultimately, substantial shareholder returns over time.”

Poor junket business in VIP rooms at the new properties are making the biggest impact, suggested analyst firm Daiwa. “Galaxy has failed to attract new junkets to Galaxy Macau 2 despite its leadership in junket relationships,” said a Daiwa report. “This underlines there is no longer the pent-up demand from quality junkets that there was, say, 12-18 months ago.”

Market leader SJM Holdings, which operates 18 casinos on the Macau Peninsula and Taipa island, saw its net profit shrink by more than 50pc for the first half of the year. But despite the slump, the Macau-based company remained market leader at the end of the period, owning a 25.5pc share of the mass market and 21.2pc share of the VIP market.

“While challenging conditions persisted throughout the first half of the year, SJM has focused on enhancing customer service and controlling costs to the extent possible,” noted Dr. Ambrose So, SJM Holdings CEO. “We remain optimistic about the future of Macau and we are proceeding with construction of the Lisboa Palace integrated resort on Cotai.”

Sands China, which continues to chase SJM as the number one player in the market, reported profit falling 46pc for the first six months. After posting its results, the company said that it has pushed back the opening of its US$2.7bn Parisian Macao on the Cotai Strip and has applied to the Macau government for an extension on its April 2016 deadline.

MGM China saw its profit shrink by 37pc to US$309m during the first half period, but its market share actually increased, despite its rival Galaxy opening new facilities. The company stated that it has shifted gears and will “remain focused on main-floor business,” with 80pc of its profit for the 2015 first half directly attributed to the mass-market segment.

Wynn Macau reported profits slipping 60.6pc year-on-year in the first half of 2015, as it saw turnover shrink at VIP gaming tables. Melco Crown Entertainment, which is anticipating the launch of Studio City at the end of October, showed the worst results with profits plummeting by 88pc down to US$14.3m for the first six months of the year.

But amid the extended losing streak that caused Macau’s GDP to drop 26pc year-on-year in the second quarter, a unified focus on turning the former Portuguese colony into a tourism destination drives momentum. The impact of the anti-corruption drive was made clear on the first-half books and operators hope the road to recovery will start as new facilities open.

“In the near future, the gaming industry in Macau anticipates facing strong headwinds with market conditions expected to remain unfavourable,” remarked Lawrence Ho, Chairman and CEO of Melco Crown, the worst performing operator during the first half. “Further support is expected from the government in line with its strategy to diversify Macau’s economy.”