If you have been following the news this year, you must be in the know already that Macau’s casinos have been in trouble for some time now. Following the Chinese government crackdown on corruption and the subsequent flee of high-rollers from the horizon, the revenue plunged 49% last year, hitting an all-time low overall for 2015. Below we will look at how two of the biggest players are dealing with the situation.
Sands China took a gamble last September, when the now 82 years old owner, business magnate Sheldon Adelson appointed a new director of his company. Wilfred Wong, a Beijing insider, is the first in this position of Chinese origin. The markets almost immediately responded positively to the news, with shares of the company rising as much as 2.7 percent to HK $26.30 after the announcement, following four straight days of declines prior to it. Mr. Wong has experience of 15 years in China’s top lawmaking body – the National People’s Congress. Now under the new management, the company is preparing to open a $2.7 billion Parisian Macao resort by September 2016. After the not so promising January (although that is on average a weak month for the country, spent in preparation for the Lunar New Year), Mr. Wong qualified the performance for February as “satisfying”, saying the numbers are getting better and the picture – more optimistic altogether, as the tourists flow from mainland China is growing and starting to compensate for the lost VIP gamblers.
Another industry titan from the area – Galaxy Entertainment Group Ltd, reported their last year’s results as well this week. Their fourth-quarter earnings fell 7% compared to the year before. Not an optimum result as well but still – far less than the decline analysts were predicting a few months ago. Here as well, the main reason for their improved records is the shift of focus from high-rollers to smaller stakes players and non-gambling resorts. This year they are planning on developing a resort on land site in Hengqin (an island in the south of of Zhuhai, Guangdong province, just 200 meters from Macau). Galaxy shares have risen 6.5 percent so far this year, making it the only one among all Macau casino stocks that is on the rise and the best performer in the Hang Seng Index – a sure indication that whatever their strategy is, it is working.
One of the chairmans of the company, Chinese billionaire Dr. Lui Che Woo, shared on Teledifusão (a popular Macau local radio station) he is confident the group will see stable growth as a result of its expansion in inland resorts. Finance experts seem to be sharing his view – Aaron Fischer, analyst from CLSA Ltd (Asia’s leading and longest running independent brokerage) comments “Profit improvement for Galaxy can be sustained in 2016 because it has among the best non-gaming products in Macau, especially its hotel and retail offerings,”.
It will be curious to see whether other casino resorts will follow and how will this be affecting the results of the first quarter of 2016.