Shrinking revenue from gaming in Macau, which has hit James Packer’s Crown Resorts, is unlikely to make a recovery this year.
Standard & Poor’s says Macau’s better-than-expected gaming revenue numbers for February are not a sign of a rebound.
The Gaming Inspection and Coordination Bureau released data showing gaming revenue declined 0.1% last month, the smallest year-over-year decrease in the past 21 months.
“We reiterate our view that gaming revenue in Macau is likely to decline 0% to 10% in 2016, given policy headwinds and the structural shift to mass market customers from high rollers,” says Standard & Poor’s Hong Kong-based credit analyst Sophie Lin.
“We expect the effects of the Chinese government’s commitment to anti-corruption and tightened regulations in Macau to continue to constrain gaming revenue growth in Macau in 2016.”
The rating agency sees sluggishness in revenue from high rollers, or the VIP segment, which may continue to fall 10% to 20%.
Gaming revenue from the mass market segment, or “regular customers,” is expected to stabilise.
Crown Resorts posted a flat 1.6% rise in half-year profits to $205.04 million. Crown’s share of profits from Melco Crown Entertainment, the casino operator in Macau, were down 89% to $9.4 million, a drop of $75.9 million.
“Among the casino operators we rate, weak gaming revenue growth in 2016 will have the least impact on companies that focus on the mass market segment or those that have large cash flows in other gaming markets,” says Lin.
This includes Melco Crown in Macau.