Stock analysts predict a prolonged dry spell for the SAR's gaming industry although officials have remained unfazed

Macao's gross gaming revenue is expected to decrease 45 percent in February from a year earlier, with risk on the downside, said Credit Suisse in a report.

The financial services firm said revenue for the first quarter of 2015 is expected to reach 66.7 billion patacas ($8.3 billion), down 12 percent from the last quarter of 2014. It predicted revenue for the whole of 2015 will fall 6 percent from a year before.

Barclays estimated that Macao's average daily gaming revenue in the first week of February amounted to about 630 million patacas, down from the 714 million patacas daily average for January. It estimated that the combined revenue for January and February would decline 29 percent year-on-year, while the whole year revenue was expected to fall by 8 percent.

Macao's Secretary for Economy and Finance Lionel Leong Vai-tac told media the gaming revenue for February was expected to be lower than a year earlier, but he said that the decrease was normal. Leong said the revenue for February 2014 was 38 billion patacas, a record that was not expected to be matched this year.

Leong noted that local casinos' revenues in the run-up to the Spring Festival holiday was traditionally lower than in other times of the year.

Credit Suisse said that industry insiders, including junkets, operators and premium mass hosts, have been bearish and many of them were considering exiting the industry. But the investment community has remained positive. Some investors are buying casino shares in anticipation for a better second half, the bank said and warned that these investors could be too optimistic.

"With revenue still sequentially deteriorating, with a full smoking ban that will be implemented in the second half or early 2016, new casino opening may receive a much lower table allocation than they have expected. Also, with mainland macro remaining soft and anti-corruption seeing little room for easing, we see a very low chance for a sharp recovery in the second half", Credit Suisse said in a report.

The second phase of Galaxy Macau is scheduled to open in May and the Melco Crown's Studio City Macau is coming on line later in the year. UBS said that these new projects would probably be allocated 100 to 150 gaming tables each, lower than earlier projections. It said the low table allocation would affect investor sentiments on gaming stocks.

Kenny Tang Sing-hing, chairman of Hong Kong Institute of Financial Analysts and Professional Commentators, said the gaming industry's high growth phase has ended and it will be entering a time of stable but slow growth.

"The mass market and mainland's emerging middle class would be the driving force of the industry," Tang said.

felix@chinadailyhk.com

The mass market and mainland's emerging middle class are the driving force of Macao's gaming industry in future, says an expert. Brent Lewin / Bloomberg

(HK Edition 02/17/2015 page8)