International edition
September 27, 2021

Analysts anticipate gaming revenue to hit us$ 34 billion this year

Macau casinos post solid earnings and shares fall on outlook

(Macau).- Growth in Macau continues to power earnings for gaming companies operating there, with Galaxy Entertainment Group and Wynn Macau posting solid results. Galaxy on Thursday reported a 191 % gain in third-quarter EBITDA, while Wynn Macau logged an 84 % gain in third-quarter net profit, both in line with expectations.

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Earnings are all within estimates, the key is whether this can continue due to monetary tightening in China and whether this will impact future gaming demand," said Ben Kwong, chief operating officer at KGI Asia in Hong Kong.

Despite a voracious appetite among rich mainlanders to gamble in China's only legal casino destination, investors remain uncertain about the outlook for the industry due to fears that credit tightening in the mainland will crimp liquidity and affect growth prospects.

"There are a lot of unconfirmed rumors that will continue to negatively affect sentiment. Right now people are adjusting their future growth assumptions downward for next year," said Victor Yip, analyst at UOB Kay Hian in Hong Kong.

Shares of Wynn Macau and Galaxy were down 3.89 % and 5.48 % respectively on Thursday, against a 1.78 % drop in the Hang Seng Index.

Shares of Hong Kong-listed gaming companies have slumped between 20 and 45 % from highs in August on worries that a funding squeeze for Chinese entrepreneurs will impact the health of Macau's VIP junket operators -- middle men who advance credit to wealthy mainland gamblers -- despite executives and analysts saying otherwise.

Macau is heavily reliant on the junket sector, which contributes over 75 % of total revenue.  
Macau's thriving industry would suffer a blow in the event of a hard landing for China, the world's second-largest economy, prompting investors to remain on edge, focusing on the health of Macau's junket industry as a key near-term factor, analysts say.

They anticipate gaming revenue generated in Macau to hit about us$ 34 billion this year, more than five times neon rival Las Vegas' expected us$ 6 billion. But they are more cautious about 2012 because of expectations of slowing growth.

Wynn Macau Chairman and Chief Executive Steve Wynn said on a conference call that there had been no change in collectability of debts for the us$ 14 billion company and it was very comfortable with its position on bad debt provisioning.

Wynn Macau, with its bronze obsidian facade and Las Vegas-style dancing fountains, is considered to have a heavier reliance on the high-rolling sector, where customers spend more than us$ 128,600 per visit.

Galaxy Entertainment, valued at around us$ 8 billion, is less  reliant on VIP business since opening the doors to its us$ 2 billion casino in May, which is focused on attracting China's burgeoning middle class. "We remain cautiously optimistic about certainly the near term and very bullish about the long-term prospects of Macau," said Galaxy's CFO Robert Drake.

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