Battered gaming stocks still anyone’s bet
Galaxy Entertainment Group Chairman Lui Che-woo, in announcing a 60 percent plunge in 2015 profit for the group, declared that the worst is over for Macao’s casino operators, who have been battered by the sharp fall in the number of big-time gamblers from the Chinese mainland.
But there is no sign that things will get better in Macao, at least in 2016, as economic growth in the major markets, including the mainland and Hong Kong, is expected to be clouded by dwindling overseas demand in coming months.
Investors itching to buy Hong Kong-listed gaming stocks at current low prices will need to assess not only the earnings potential of individual casino operators but, more importantly, their efforts in re-branding Macao as a destination for family tourism.
Most casino operators have said they plan to expand their hotel properties, with the inclusion of theme parks and amusement facilities to attract families from traditional tourism markets.
But in the face of stiff competition from other regional destinations, including Hong Kong which has the added attraction of shopping, Macao is hamstrung by its reputation as a swingers’ paradise which is hard to eradicate even with the most aggressive advertising campaigns.
Macao’s infrastructure is also seen to be inadequate in coping with the large crowds of visitors keen on exploring the city rather than placing their bets in casinos. There’s no shortage of horror stories about Macao taxis, the only mode of transport for most tourists.
Galaxy President Michael Mecca said the group sees Macao as “truly a proposition for families now”.
Yet its Broadway Macau — a family-friendly casino resort which opened last year — posted a loss of HK$7 million.
MGM — a major rival in the Macao gaming sector — earlier said the opening of its resort in another part of town would be put off from later this year to 2017.
Even assuming that the city’s re-branding effort succeeds, investors still have lingering doubts about whether revenue generated from family tourism can make up for the decline in gaming receipts.
Casino operators have yet to come up with a detailed analysis that can make investors more confident in pricing their stocks.
But before they do that, investing in Macao gaming stocks remains a gambling proposition.
Even if Macao’s rebranding effort succeeds, doubts remain over whether family tourism can make up for the drop in gaming revenue.