Short seller Chanos bearish on Macau

Prominent hedge fund manager, Jim Chanos, said he expects a huge cut in estimates for Macau’s gambling operators, saying they are making the same mistakes as Las Vegas did in the 60s and 70s, Reuters reports.

Chanos said capacity in Macau will increase by 30 to 40 percent over the next 18 months and 100 percent over the next two to three years. The expansion comes as revenues have turned down, squeezing profit margins.

"The stuff that is being built, as that's happening, the revenues have now turned down due to credit crunch, corruption, all the things we've been talking about. Take your pick.”

“I think the estimates are going to come down huge,” he was cited as saying.

Chanos also said he believed the capital flight from China was accelerating, eroding the country’s foreign exchange reserves.

Analysts have already begun cutting their forecasts for Macau gross gambling revenue this year as China’s anti-corruption drive and slowing economy has derailed the VIP market. GGR in October is expected to be down about 21 percent in the fifth straight monthly decline.

However, most analysts are still optimistic that the investment in increased capacity, with the first new resorts to come on line next year, will lead to higher revenue growth. The additional hotel capacity is expected to trim sky high room rates, encouraging the expansion of the more profitable mass market segment.

 

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