Operator News

South-East Asia – Mass market to drive Macau, Singapore and Malaysia

By Phil - 29 November 2017

Fitch ratings believes that Chinese tourism will continue to drive the mass market in South East Asia with high single digit growth predicted for Macau in 2018.

Alex Bumazhny, Senior Director at Fitch said: “Fitch believes Chinese tourism expenditure is a key driver of gaming performance in Southeast Asia. Chinese visitors were the largest segment by nationality in Singapore in the first eight months of 2017, at 19 percent of total arrivals. We feel VIP tourism across the region will continue to recover, and ongoing growth in mass-market gaming tourism will support regional expansion and Australian [casino resort] construction. Overall, we view the Asia-Pacific market as underpenetrated, at least in the mass-market segment.”

Fitch said Macau’s 2018 GGR would increase ‘in the high-single-digit range’ or ‘slightly above China’s GDP growth.’

Mr. Bumazhny said it would be driven by the mass-market segment.

“Macau’s gaming revenues grew 19 per cent in 2017 through October, reflecting double-digit growth in the VIP segment (28 per cent growth through September), which tends to be more volatile and is heavily reliant on credit availability on the mainland,” he explained. “Our 2018 and longer-term expectations discount the current year-to-date VIP trajectory. Las Vegas- and Asia-oriented operators such MGM [Resorts International] and Wynn [Resorts Ltd] are winding down their major developments. Absent major development opportunities in Japan or Brazil, Fitch expects operators to increase dividends, which will keep free cash flow relatively steady.”

Singapore’s two casinos reported a 10 per cent increase in their revenue in 2017 having seen it decline by 30 per cent a year earlier. Fitch attributed this to 1.55m visitors from China during the first half of the year. It predicted that combined VIP GGR for marina bay sands and Genting Sentosa should reach US$1.73bn in 2017 compared to an earlier prediction of US$1.49bn.

Mr. Bumazhny said: “GGR from Singapore’s two casinos will grow again during the first half of 2018 having been relatively flat throughout 2017. We do not believe competitive pressures in the Singapore market will increase in the near term as new licences are unlikely.”

It added that the Malaysian gaming market would ‘remain stable’, ‘underpinned by a domestic, mass-market focus” at Resorts World Genting, the country’s only casino resort.

“Visitor arrivals at the resort were steady in first half 2017, but are likely to grow in 2018 as more attractions open following redevelopment,” Mr. Bumazhny explained.

With regards to the Australia market he added: “Resilient underlying domestic demand, supported by a favourable regulatory environment, continues to be the main factor supporting our expectation of stable cash and EBITDA generation in 2018.”