Outlook on Macau casinos remains optimistic

Despite the widening stock losses on Macau casinos, the Las Vegas Sands Corp. is reporting that the company has not observed any negative signals in its business in the Chinese gambling enclave.

As of today, October 3, investors are selling gaming stocks on fears that a heightened credit squeeze on private firms in China will hurt gaming revenues, says CNBC.com. Gaming accounts for more than 70 percent of Macau’s revenues and is vulnerable to unstable credit flows due to its reliance on a cloudy junket system.

However, Las Vegas Sands Corp, which is one of three U.S.-based casino companies, including MGM Resorts International and Wynn Resorts Ltd., with heavy investments in Macau, says that these fears appear unwarranted, writes the Wall Street Journal.

It has been a favorable time for the U.S. casino companies, which are reporting surging half-year earnings through their Macau units Sands China, Wynn Macau and MGM China.

“We are continuing to go forward with our investment in Asia and we are continuing to look for additional opportunities in Asia,” says Michael Leven, president of Las Vegas Sands Corp.

Hong Kong’s casino firm SJM, which controls 30 percent of the market fell 25.5 percent to a low of HK$10.5. MGM China dropped 20.5 percent and Galaxy Entertainment closed down 18.9 percent, according to Reuters.. However, analysts predict that the casino’s mass market sector will continue to be strong but will likely dip due to slowing VIP gaming revenue growth next year. In fact, before the dip over the last couple of days, Macau stocks had outperformed the Hang Seng Index this year.

The casinos are being hurt most by speculation that steps by the Chinese government to tighten credit are leaving high-rollers with less cash to play with, according to Philip Tulk, head of Asian conglomerates and gaming research at Royal Bank of Sctoland Group Plc. “People are afraid and selling their winners,” Tulk told the San Francisco Chronicle. “In this kind of market, anything that’s up gets sold. It’s like a whack-o-mole.”

But Junk operators, intermediaries between the casinos and Chinese gamblers, still have large amounts of their own cash that they can use to extend credit, helping gamblers circumvent China’s currency controls. Reuters also reports that Macau gambling revenues are expected to hit $34 billion this year while Las Vegas is estimated to hit $6 billion. Looking to 2012, analysts predict that China’s growing mass-market gambler sector should grow strongly due to the demand for gaming and a strengthening currency.
 

Suggested Articles

Her Lyda Sofa, Fascio Collection and Crossbeam table all earned recognition from the Chicago Athenaeum Museum of Architecture and Design.

Rob Emberley will lead the Séura marketing team as the company expands digital efforts, reaches into new markets and accelerates product growth.

In Gibsonton, Fla., Extended Stay Americas leaders shared how a new look will help the company gain ground nationwide.