acau gaming developer Melco Crown Entertainment said on Tuesday it expects the Asian gambling centre to rebound from a sharp contraction, while eyeing expansion opportunities in Taiwan’s emerging casino market.
“The worst time has probably gone” for Macau, CEO Lawrence Ho said at a press conference in Macau. The opening of the us$ 2.1 billion project in the world’s largest gambling hub will create about 7,000 jobs, he added.
Macau’s workers have seen jobs cut as the credit crunch and tightening travel restrictions by China, the city’s biggest market, hurts gambling revenue. Las Vegas Sands Corp. has halted construction worth about us$ 12 billion in the city, leading to at least 9,000 job losses, while Galaxy Entertainment Group Ltd. has delayed the opening of a resort.
“We expect Macau gaming revenue to decline by 10 % this year based on a slower Chinese economy, the credit crunch and visa restrictions,” Morgan Stanley analysts Praveen Choudhary and Corey Chan said in a note to clients late yesterday.
Hopes that Beijing would ease visa restrictions and a global rebound in equities from multi-year lows helped Melco shares rise around 70 % in the last three months, though the stock is stil down nearly 80 % over the last year.
The visa restrictions probably won’t ease before the end of this year, said Choudhary and Chan, who downgraded the stock of Ho’s Hong Kong-listed Melco International Development Ltd. to “underweight” from “overweight.” Lawrence Ho said he expected China to relax its visa restrictions. “In the next few months we are confident that there will be policies announced,” he said. "2009 should get gradually better," he told reporters in Macau.
China began curbing arrivals of its citizens to Macau last year. Among its measures was restricting residents of Guangdong, its southern province bordering Macau, to one visit every three months starting from October 2008, instead of one trip every two months.
Still, Melco Crown, which shifted its focus from middle- class gamblers to VIP players who spend at least us$ 125,000 per visit, won’t be the immediate beneficiary from any relaxation in these curbs, according to Karen Tang, an analyst at Deutsche Bank.
Melco Crown and Wynn are the only two casino operators adding new capacity in Macau over the next 18 months.
Relaxation of travel curbs will affect mainly the so-called mass market, instead of the VIP segment, Tang said in a January 8 report. “VIP credit tightening has a much larger impact on Macau, and this is quickly worsening.” Melco Crown last month said it will offer staff three days of unpaid leave each month and sabbaticals. Shares of Melco Crown dropped 16.5 % to close at us$ 3.13 in Nasdaq trading yesterday.
Average monthly revenue at Macau’s casinos may fall to us$ 876 million next year, Edmund Ho, Macau’s CEO, said November 11. Casino revenue in the third quarter last year was us$ 3.3 billion, according to government statistics.
Casino revenue in Macau was us$ 10.5 billion in 2007, double the figure in 2004, when the government ended the 40-year monopoly of Stanley Ho, not related to the CEO, and allowed foreign companies Las Vegas Sands, Wynn and MGM Mirage to operate.