Fitch sees cannibalization risk to Macau EBITDA in 2016

Wednesday 23rd of September 2015

Fitch Ratings said it expects Macau’s gross gaming revenue to be stable in 2016 after a drop of between 33 percent to 34 percent this year, but says it sees the possibility of pressure on EBITDA as a result of cannibalization as new properties open.

The agency has cut its forecast for GGR this year from its prior estimate of a 29 percent decline. So far, year-to-date, revenue is off 36.5 percent.

“The positive impact from the increase in capacity related to Studio City, the March 2016 opening of Wynn Palace and 2H16 openings of MGM Cotai and Parisian will be offset by tough YoY comparisons through May 2016 and the weaker yuan relative to Macau's pataca,” it said in a report.

“Fitch believes the risks operators face related to the new properties cannibalizing the existing properties and table allocations being less generous than what the operators have requested are partially mitigated by the operators' ability to shed development related costs as their respective projects open.”

Galaxy Entertainment only received 150 tables for its new property, far below its requests and Melco Crown Entertainment is expected to receive a similar allocation for Studio City.

Fitch also said that its macro economists don’t expect a collapse in the mainland economy, despite recent negative news. They say the slowdown is led by investment rather than consumption, which is less dire than it may appear for Macau.

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