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Macau Gambling Hub’s Declining Revenues Cause for Alarm

Jan 06, 2015 - by Phyllis
Macau gambling revenues

Macau’s gambling revenues are decreasing

In 2014, Macanese gaming revenue decreased 2.6% to $54.4 billion. This is the first nose-dive of profits ever to be recorded, in 11 years, since 2002, when gambling laws liberated the casino market to competition. Revenues plunged 30.4% cent to $9 billion in the last month of 2014, making it the seventh straight month that profits have been waning.Macau, the largest gambling hub in the world, has seen its revenues steadily decline at an alarming rate last year. Analysts and gambling operators alike are speculating if the global recession is the main cause or is Jingping’s clampdown on illegal money laundering the main cause for concern.The Sidney Morning Herald: James Packer among billionaires hit by $100 billion Macau casino losses

The Chinese government crackdown on corruption in the gambling stronghold of Macau has left a whopping $100 billion hole in the market value of the six Macau casino stocks in 2014. The campaign, including the fight against debit card scams, impacted negatively on gambling activities. This has caused the gambling hub to experience its very first slump in gambling returns since 2002.

Australian billionaire James Packer, and other gambling operators, such as his joint venture partner’s father Stanley, or yet still anti-online gambling campaigner Sheldon Adelson, have all their casinos in a rut. Meanwhile analysts converge and discuss what all this could mean for the world’s largest gambling resort and its fortunes.

The Hong Kong exchange recently revealed in online mobile news, that all six Macau casino stocks listed a combined loss in market value amounting to $92 billion, in the 12 months up to December 31. The parent company Crown Resorts has 33.6 per cent of the joint venture and Ho another 33.6%.

Melco Crown alone lost a whopping $8 billion in market capitalization during last year. The fall represents a 35% decline in stock value just a year after the company’s value doubled, when gambling revenue increased 19% per cent.

However, the current decline in market capitalization has left the company opting to withdraw from the Hong Kong exchange, citing difficulties in raising funds and the need to limit share trades. Crown Resorts, said it was determined though to stick it out in the NASDAQ listings.

Sheldon Adelson’s Las Vegas Sands’ subsidiary, Sands China, fared even worse. It hit a record low market capitalization of all the six stocks, with a mere $26 billion in profits. 40% loss in stock value was reported in 2014. Stanley Ho’s SJM Holdings, came out a little less scathed, with a 52 % loss in value, representing a market capitalization decline of $7 billion.

Channel News Asia: Melco Crown to delist in HK after Macau revenue slump

Hong Kong businessman Lawrence Ho and, James Packer, son of the defunct Australian media and gambling magnate, Kerry Packer, have communicated, in the latest gambling news that Melco Crown Entertainment has had its first plunge in profits ever, in Macau.

Melco Crown’s City of Dreams resort complex stock would be removed from the Hong Kong stock exchange in order to save costs and for practical reasons. For, to carry the listing would demand ‘additional ongoing regulatory compliance obligations and such requirements involve significant additional costs’.

The company went on to say that for now a solution hasn’t been found to increase profits even with a market capitalization of close to US$14 billion. However it also stated that it would keep its security on the official register of the NASDAQ in the US. Friday, 2 January, 2015 shares closed at a low 4.88% at US$24.16.

The ex-Portuguese colony reported on January 2 that gambling yields went down 2.6% year-on-year to US$44 billion last year. This has been the only decline since yearly numbers were made available to the public as of 2002.

Macau, China’s only legal casino gambling hub, relies heavily on high rollers from mainland China. However, big spenders are being scared off by the anti-corruption campaign launched by Chinese President Xi Jinping and his government to clamp down on Chinese officials accepting bribes. This has resulted in a slowdown in the mainland economy which directly affects casino earnings.

The Sidney Morning Herald: Packer’s Melco Crown set to quit Hong Kong Stock Exchange

Melco Crown Entertainment whose Macau casino is jointly owned by James Packer’s Crown Resorts and Macau gaming mogul Lawrence Ho has revealed that it will pull out of the Hong Kong Stock Exchange because of the immense pressure to raise money and limit share trades. However, it will remain on the NASDAQ, where its ‘shareholders are far more active’.

The company says it hopes that this move will not adversely affect the asset value or earnings for each share. It explains its actions by citing that “Appropriate opportunities to raise additional equity in Hong Kong have not arisen and maintaining the listing requires additional ongoing regulatory compliance obligations and such requirements involve significant additional costs and administrative burden”.

Crown Resorts who owns 33.6 % of the company and Ho, the same, now have to contend with decreased numbers of gamers from the mainland. Macau, which was once swarmed with eager punters who had just a little more than the China welfare lottery from mainland China, have had better days since public records started to reveal gambling revenues in 2002.

Chinese government’s campaign against illegal cash flow between the gaming hub and its officialdom has been blamed for the crisis at hand. Just last year October Crown Resorts hoped for a turnaround but come year end the chief executive, Rowen Craigie, admitted that “market conditions in Macau did weaken during the fourth quarter of financial year 2014”.

Some analysts speculate that gambling revenues may pick up by 10% in 2015, others think a decline of 9% is more likely to happen. Given the current worldwide financial crisis, the actual outcome will be like that of the toss of a coin – no one really knows.

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