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Macau slowdown may lead to dividend payout cut: CS

Dec 10, 2014 Newsdesk Latest News, Macau, Top of the deck  


Macau slowdown may lead to dividend payout cut: CS

The ongoing decline in gross gaming revenue (GGR) in Macau can lead the city’s casino operators to cut their dividend payout rates in the next earnings season, notes Credit Suisse AG.

Hong Kong-based analysts Kenneth Fong and Isis Wong warned about a “potential dividend payout cut” on “weakened” results and a “heavy” capital expenditure cycle in 2015, related to the development of new casino resorts in Cotai, Macau’s answer to the Las Vegas Strip.

All Macau casino operators are developing new or expanding existing properties in Cotai with budgets above the US$1-billion mark.

UBS Securities Asia Ltd however forecasts dividend payout ratios will be kept at high levels. “We believe the ability to pay remains strong even in the stressed scenario,” analysts Anthony Wong and Angus Chan wrote in a note on Tuesday.

“But to keep these payout ratios, some companies will have to be willing to raise gross debt levels to ensure cash balance is not depleted,” Mr Wong and Mr Chan cautioned.

Macau’s six casino concessionaires – all of which are listed in Hong Kong – have started paying dividends to its shareholders. The last company to begin doing so was Galaxy Entertainment Group Ltd, announcing its first dividend in March this year.

The continuous drop in casino revenue impacting liquidity levels is expected to extend into December. Based on non-official industry returns for December 1 to 8, several brokerages are forecasting GGR for the entire month to drop by between 23 percent and 30 percent measured in year-on-year terms.

Hong Kong-based analysts Jamie Soo and Adrian Chan, from Daiwa Securities Group Inc, said in a report on Tuesday: “Macau’s table-only GGR for December 1 to 8 was HKD5.9 billion [US$761 million] with an average daily revenue of HKD738 million, down 20 percent week-on-week and [down] 22 percent year-on-year. Based on the current run rates, we expect December’s total GGR to see negative growth of 24 percent to 30 percent year-on-year.”

Wells Fargo Securities LLC senior gaming analyst Cameron McKnight noted that the December performance could be negatively affected by the upcoming visit to Macau of Chinese President Xi Jinping. “Mid-month results could be impacted if President Xi’s visit to Macau affects high-end visitation,” U.S.-based Mr McKnight said.

President Xi is expected to visit Macau on December 19 and 20, to head the official celebrations of the 15th anniversary of the handover of Macau from Portugal to China. The visit has not yet been officially announced.


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