Higher numbers of new-to-market gaming tables could be “incremental negative” for Macau’s casino industry, as it could intensify competition in the sector, suggests a note from Daiwa Securities Group Inc.
“Despite ongoing pressure in the [Macau] VIP segment, it continues to face table shortages as casinos increasingly have reallocated tables to the mass floor. As such, we see this influx of tables as detrimental to the negotiating power for casino operators,” analysts Jamie Soo, Adrian Chan and Jennifer Wu wrote in a note on Monday.
The US$3.2-billion Studio City, majority-owned by casino operator Melco Crown Entertainment Ltd and opening on October 27, will likely have an initial table allocation above market expectations, several analysts suggested last week.
Daiwa, quoting its own industry sources, said Studio City is expected to open with 210 new-to-market tables, “with the balance of approximately 40 tables to come on board by the end of the year”.
“Our industry sources have also noted that the Macau government is now in talks to allocate an additional 50 tables to Galaxy [Entertainment Group Ltd] and a further 50 new tables might be made available towards the beginning of 2016 (total of 100 new tables),” said Daiwa’s note.
Galaxy Entertainment opened on May 27 its HKD19.6-billion (US$2.5-billion) Galaxy Macau Phase 2, with 150 new-to-market tables.
“The unexpected incremental increase in tables, while perceived to be positive to those with additional tables, is actually an incremental negative for the industry as a whole,” said Daiwa’s note.
Deutsche Bank AG analyst Karen Tang suggested in a recent note the possibility of the Macau government relaxing the cap on the number of live gaming tables allowed in the market as a support measure to the industry.
The government has imposed a cap that seeks to limit the growth of live dealer table numbers to 3 percent compound annual expansion until the end of 2022, from a base of 5,485 tables recorded at the end of the fourth quarter in 2012.
The Macau gaming market had 5,814 tables at the end of June, according to official data.
A higher number of additional tables could also have a negative impact on mass-market business, “as we have seen a significant decline in minimum bets over the period post the Galaxy Macau Phase 2 opening,” Daiwa said in Monday’s note.
The analysts noted that recent data suggest that the Macau market “is now increasingly skewed towards peak seasons, with visible weakness pre- and post-peak periods”.
“The introduction of additional tables should thus intensify competition, especially during trough periods,” said the Daiwa team.
The fact that the Macau government seems to be granting tables on a staggered basis “should lead to longer ramp-up periods for new properties and further cannibalisation of existing properties,” said the trio of analysts.
They added: “We think the peninsula-centric operators with lower table counts (i.e., Wynn [Macau Ltd] and MGM [China Holdings Ltd]) face greater risk than Cotai-centric operators, as they should face bigger challenges in finding the right balance between ramping up Cotai and maintaining productivity of their existing Peninsula properties.”
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China