De Niro, Scorcese and DiCaprio: hawkers of high-end casinos in Manila.
In a number of ways, the PRC authorities' crackdown on mainland officials gambling in Macau with state funds could not have come at a worse time for the special administrative region. With China slowing down anyway, fewer punters (gamblers in British-speak) are visiting Macau given stricter rules on bringing in gaming funds there from the PRC. To top it all off, so many other Asian countries are copying the Chinese playbook in opening glitzy new casinos of their own to steal business from Macau. There's been something of a bloodbath in the stocks of Macau casino operators as of late that has largely gone unnoticed outside of financial circles:
Gaming revenue will keep sliding through mid-year and
dividends will be cut as the cost of new capacity eats into
free-cash flow, leaving share valuations too expensive, said
Jamie Zhou, an analyst at Macquarie Securities in Hong Kong.
Zhou was one of just two analysts tracked by Bloomberg with sell
ratings on Sands China Ltd. and Galaxy Entertainment Group Ltd.
when he started covering the shares in December.
The two largest casino operators by market value in Macau
have since tumbled at least 20 percent as China’s economic
growth slowed to the weakest pace since 1990 and President Xi
Jinping’s anti-graft campaign deterred VIP gamblers. While a
gauge of Macau casinos rallied the most in two weeks on Tuesday
as the revenue drop was smaller than some analysts predicted,
Zhou is keeping his sell recommendation on the industry. “Macau is in a tough spot,” Zhou said in an e-mailed
response to questions from Bloomberg News. “We believe
dividends will be slashed across the board.”
The six main casino operators -- Sands, Galaxy, Wynn Macau
Ltd., SJM Holdings Ltd., MGM China Holdings Ltd. and Melco Crown
Entertainment Ltd. -- lost $89 billion in market value over the
past year, according to data compiled by Bloomberg. An index of
the stocks fell 2.5 percent on Wednesday, bringing its 12-month
slump to 47 percent.
In a way, then, there is some cannibalization going on insofar as those opening casinos elsewhere in Asia siphoning business away from Macau are oftentimes these very same operators. For instance, the City of Dreams in Manila is run by Melco, with the promotional help of the likes of Robert De Niro, Martin Scorcese and Leonardo diCaprio. Which begs the question: why hire Italian-American actors to hawk the casino mainly to the Chinese?
Manila’s members-only Signature Club in Melco Crown
Entertainment Ltd.’s City of Dreams casino has entrance signs in
both English and Chinese, while Mandarin-speaking staff direct
guests to cashiers, shops, and restaurants. The neighboring
Solaire Resort and Casino owned by Bloomberry Resorts Corp. has
suckling pig and Peking duck on the menu, catering to Chinese
palates.
“There are a lot of excuses to go the Philippines; we
always promote the Philippines not on the casino but the whole
package,” Cristino Naguiat, chairman at gaming regular
Philippine Amusement & Gaming Corp., said in an interview. “Even with the crackdown in China, we still had higher
volume in terms of gross gaming revenue and in terms of junket
and VIPs,” he said last month in Manila.
South Korea's resort destination of Jeju Island as catering to Chinese gamblers turned off by Macau's newfound strictness:
Macau casino revenue fell last year for the first time and
may decline another 8 percent this year, according to analysts
surveyed by Bloomberg. By contrast, South Korea and the
Philippines will grow 16 percent and 33 percent respectively
this year, gaining from the spillover of Chinese gamblers,
Deutsche Bank analyst Karen Tang wrote in a note...
Operators such as Paradise Co. in South Korea are hiring
Mandarin-speaking staff and offering VIP treatment including
free flights, limousines and hotel stays to big spenders. Echo
Entertainment Group Ltd. of Sydney and NagaCorp Ltd. in Cambodia
cater to the junket operators who organize trips for Chinese
gamblers with perks such as higher commissions, lower taxes and
private jets.
“Premium mass players can be recognized as VIP players and
treated better than in Macau,” said Lee Hyuk-Byung, vice
chairman of Paradise, in an interview in Seoul. “And we have
other attractions in Korea such as culture, fashion, food.”
Fancy plastic surgery or the, er, paid companionship of Korean actresses? Come to Korea:
Gamblers who bet at least $50,000 at Paradise’s casinos
qualify for freebies usually available only to VIP players, Lee
said. In Macau, the minimum needed to get similar perks from
junket operators is about $500,000, according to CLSA data. The
company also draws Chinese gamblers to the celebrity-obsessed
country by touting its pop culture and offering recommendations
of top Korean plastic surgeons, Lee said.
It begs the question of whether Macau will be able to complete the PRC-ordered diversification away from gambling if its cash cow is being slaughtered in the meantime, with no help from the killjoy Communists.
