China State Construction International Holdings Ltd’s backlog of Macau building projects in progress – judged by value – leapt by 178 percent year-on-year as of end-August, the firm told the Hong Kong stock exchange on Wednesday. It didn’t give reasons.
It is common in the building industry to have a pipeline of projects in order to smooth cash flow and to avoid laying off workers. Company-wide, China State’s backlog of regional projects at its international unit – judged by value – rose a more modest 19 percent year-on-year.
Out of an aggregate value for the firm’s Macau projects in progress – tallied at HKD13.95 billion (US$1.8 billion) as of August 31 – a total of HKD11.72 billion, or 84 percent of all work in progress, was described as backlog. The HKD11.72 billion value was up from HKD4.22-billion worth of backlog one year before.
Aside from the issue of importing enough construction workers to Macau – the city’s unemployment rate is only 1.7 percent – developers of casino resorts in Cotai are also facing problems with getting construction licences on time. Sands China Ltd has recently said in filings that it has been waiting on government permits for certain Cotai construction works. MGM China Holdings Ltd additionally mentioned question marks over timing of project openings linked to receipt of government permits. The firm’s MGM Cotai project is scheduled to open in 2016.
China State Construction International is the main contractor for the work, with a contract valued at HKD10.5 billion.
China State’s Macau order book for the international unit includes 50 percent of a joint venture with Australia’s Leighton Holdings Ltd for construction of Wynn Macau Ltd’s US$4 billion Wynn Palace casino on Cotai. The cooperation is known as Leighton China State Joint Venture.
There was no suggestion in China State’s filing that either the MGM Cotai or Wynn Palace schemes were part of China State’s Macau backlog.
Wynn Palace is scheduled to open in the first half of 2016. Wynn Macau Ltd reiterated on Wednesday in its 2014 interim report that an early completion bonus for “achievement of substantial completion on or before 25 January 2016 will be paid to the general contractor if certain conditions are satisfied.”
China State Construction International is also a partner – via Leighton China State John Holland Joint Venture – in a contract to build a fifth hotel tower at Melco Crown Entertainment Ltd’s City of Dreams casino resort on Cotai.
As of August 31, the on-hand contract value of all China State Construction International’s projects amounted to approximately HKD150.68 billion, among which the backlog was approximately HKD93.80 billion. The firm said that “meets the group’s expected works in the next three years”.
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”We expect Goa to quickly become a US$1 billion market as it transitions to land-based casinos (from US$150 million today), which is still just a fraction of India’s total GGR potential of US$10 billion to US$17 billion”
Analyst at Union Gaming Securities Asia