Fitch sees VIP recovery in H2 2015

Fitch Ratings says the current rout in the VIP gaming sector is now near the bottom and revenue will begin to recover by the second half of 2015.

The ratings agency says it expects gaming operators’ performance to remain resilient despite the current downturn in a report entitled 2015 Outlook: Asia Pacific Gaming.

A crackdown on corruption in mainland China, coupled with a slowing mainland economy and property market, have triggered a sharp slide in spending from high rollers. Gross gambling revenue in Macau has fallen every month since June and the world’s biggest gambling hub is on track to record its first annual decline in revenue since the market was liberalized.

Fitch forecasts gaming revenue in Macau will fall by 4 percent in 2015, driven by the weakness in the VIP business. It also says it expects Singapore’s two properties to feel the pinch from the slowdown.

However, it says the Singapore casinos are mature properties, which will be able to withstand “moderately declining revenues and margin compression without impairing their underlying credit profiles.”

Resorts World Genting, the sole casino license holder in Malaysia, is less dependent on Chinese tourists and Fitch expects it will maintain its credit profile.

“RWG’s expansion and refurbishment initiatives will deliver longer-term foot traffic, and yield growth potential that should support the EBITDA margin at around 40 percent,” it said

The performance in Australia, where many multi-billion dollar resorts are planned, will depend on the macro-economic conditions in individual states, the agency said.

“There is a significant pipeline of new casinos and investments in existing ones in Australia, where Fitch estimates gross gaming revenues will rise by around 4 percent in 2015.”

Overall, in the longer term, improving infrastructure and the growing middle class should support casino growth in Asia, it said.

 

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