Inside Asian Gaming

40 INSIDE ASIAN GAMING | January 2013 REGIONAL BRIEFS Macau Casino Revenue Soars to US$38 billion Macau’s gross gaming revenue rose to 304.14 billion patacas (US$38 billion) in 2012, up 13.5% from 267.87 billion patacas in 2011. Although the pace of growth is down from the 42% year-on-year growth posted in 2011, analysts said Macau’s better-than-expected December gaming revenue—which rose 19% year-on-year to an all- time monthly record of 28.24 billion patacas—suggested a rebound was in sight. This compared to 3.2% year-on-year growth in October and 7.9% in November “The strong December [performance] represents a recovery in gaming revenue growth”, Aaron Fischer, head of consumer and gaming research at brokerage CLSA, told AFP . Mr Fischer said the brokerage had forecast revenue would continue to grow at a moderate 9% in 2013. “However,” he added, “with initial signs of macro-economic recovery in China, infrastructure improvements and a more stable political environment, our current gaming revenue estimate might appear to be on the conservative side.” Other Macau gaming analysts have busy revising up their estimates for revenue growth in 2013. Deutsche Bank has raised its forecast from8% to 11%. Citigroup calls for a 10% rise, while Goldman Sachs is more bullish, predicting a 16% overall revenue jump in 2013, with VIP revenue up 13% and the mass market expanding 23%. In support of its bullishness, Goldman Sachs said the 1st January opening of the eagerly awaited Guangzhou-Zhuhai railway link should drive stronger visitation growth to Macau, with Goldman forecasting a 7% increase in visitor arrivals. The investment bank also expects a strong recovery on the VIP side, driven by better macro- economic data and wealth creation from the mainland’s property market. It predicts a 16% jump in per-visitor gaming spending over the coming year. Galaxy Macau Phase 3 Could Cost As Much As US$6.5 Billion Galaxy Entertainment Group plans to invest as much as HK$50 billion ($6.5 billion) on Phase 3 of its Galaxy Macau integrated resort on Cotai, which opened in May 2011. Construction is still underway on the HK$16 billion Phase 2 of the resort, scheduled for completion in mid-2015. Ahead of that, Galaxy expects to start work on Phase 3 at the end of 2013 or the beginning of 2014, according to company spokeswoman Yoko Ku. All three phases will sit next to each other on the same site, which constitutes the largest contiguous land bank in Macau. “Galaxy will continue to do well in the short run, but there may be an oversupply in the market after 2017,” said Jeremy Tan, a Hong Kong-based analyst at Kim Eng Securities HK Ltd. “Every casino operator in Macau is expanding in Cotai.” Given that all projects are large-scale resorts with more than 2,000 hotel rooms each, it’s uncertain whether there will be enough demand to absorb the supply after 2017, when most of the new resorts will be completed, according to Mr Tan. Galaxy plans to fund its expansion through internal resources and debt facilities if needed, said Ms Ku. The company has more than HK$10 billion of cash on hand as well as strong cash flow from operations and doesn’t require additional financing so far, she said. The operator plans to draw more middle-class families by dedicating about 95% of the area to be developed under the third phase to retail and entertainment. The expanded area will include a concert arena with about 10,000 seats, a theater with 1,800 to 2,000 seats, and one shopping mall. The company is looking for hotel partners for Phase 3, which is expected to be completed in 2016 at the earliest and will bring the total number of hotel rooms and suites at the property to 4,200, from the current 2,300. Macau Casinos Face Tougher Operating Conditions In addition to raising the minimum age from 18 to 21, new laws governing entry to Macau’s casinos that came into effect in November also require the barring of people who have applied for voluntary self-exclusion. Local government-run broadcaster Teledifusão de Macau reported Growth catalyst—Macau’s Cotai strip Work in progress—rendering of the completed Galaxy Macau Phase 2