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Fitch: Macau Gaming Revenue Expected to Grow 12% in 2017
April 19, 2017 / 8:06 PM / 5 months ago

Fitch: Macau Gaming Revenue Expected to Grow 12% in 2017

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: All In: Global Gaming Handbook here NEW YORK, April 19 (Fitch) Fitch Ratings projects 12% gaming revenue growth in Macau for 2017. Year-to-date growth through March has been 13%, with February growing 18% on a year-over-year (YoY) basis. Fitch's 2017 forecast assumes low single-digit range month-over-month sequential growth for the balance of the year compared to 4% average sequential growth since July 2016. The forecasted growth rate for Macau gaming takes into account tougher year-over-year comparisons in the second-half of 2017 and the possibility that the tightening monetary policy and increased real estate restrictions may slow economic growth on the mainland. We expect about equal contribution from VIP and mass market revenues toward achieving Fitch's 12% growth forecast. VIP growth has been exceeding Fitch's expectations, growing 17% YoY in first-quarter 2017. Stronger economic indicators on the mainland, players getting acclimated to China's corruption crackdown initiatives and China's authorities heightened crackdown on casino marketing by foreign companies (so far those based outside Macau) could possibly attribute to VIP outperformance. The VIP gross gaming revenue (GGR) currently has a level similar level to that of 2010; therefore, there is a good amount of headroom for growth permitting regulatory and other conditions. Economic conditions should remain accommodative. Fitch expects fixed investments in China, an important driver for VIP gaming, to grow 4.3% in 2017, down from 5.7% in 2016. Given the opaque nature of the VIP segment (56% of GGR in 1Q17), forecasting Macau GGR with a fair amount of certainty is difficult; therefore, we remain cautious. The mass market will be driven by healthy consumer spending, for which Fitch forecasts 7.5% growth in 2017, and increasing room capacity, which encourages longer average length of stay. Longer term, we believe mass market gaming remains underpenetrated in the Asia-Pacific region. Despite being delayed, pending infrastructure projects, such as the bridge to Hong Kong, a permanent Taipa ferry terminal, a rail link to Zhuhai airport and intracity light rail, should make Macau more accessible. Based on fourth-quarter 2016 results, new casino openings on Cotai are performing largely in line with Fitch's expectations, producing roughly $100 million-$200 million of annualized incremental EBITDA for Wynn Resorts and Las Vegas Sands, after accounting for cannibalization at the existing properties. Fitch expects the Cotai investments' incremental benefits to improve throughout 2017 as the market improves and, in Wynn's case, the light rail and MGM Cotai construction winds down. Contact: Alex Bumazhny Senior Director Corporate Finance +1 212 908-9179 Fitch Ratings 33 Whitehall Street New York, NY Kellie Geressy-Nilsen Fitch Wire +1 212 908-9123 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com. The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. 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