Bat­tered gam­ing stocks still any­one’s bet

China Daily (Canada) - - HONG KONG -

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.

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