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TEXT-Fitch says Macau rev growth forecast lowered to 10 to 12 pct in 2012
July 25, 2012 / 6:52 PM / 5 years ago

TEXT-Fitch says Macau rev growth forecast lowered to 10 to 12 pct in 2012

(The following statement was released by the rating agency)

July 25 - Fitch has revised its 2012 Macau revenue growth forecast to 10%-12% from 15%, reflecting our more cautious view with respect to the near-term impact of the slowdown in China. This is our second downward revision over the last couple of months; as on June 8, 2012 market growth revenue forecast was reduced to 15% from 20% upon initial signs the slowdown was greater than original expectations. Macau market revenues grew 42% in 2011 and 58% in 2010. Overall market revenues were up almost 20% year to date through June. However, the slowdown became noticeable in May when revenues grew only 7.3%, followed by 12.2% in June. We expect July to also reflect a sluggish trend, possibly in the low-single digit range, as Typhoon Vicente had some impact with the disruption of ferry service to Macau from Hong Kong. Our updated forecast implies low-to-mid single-digit market revenue growth for the rest of 2012. Also in June, we revised our forecast for China’s 2012 real GDP growth to 8.0% from 8.2%. Additionally, our forecast for 2013 was revised upward to 8.2% from 8.0% in expectation of a modest policy stimulus in the second half of 2012. We remain comfortable with medium-term supply demand fundamentals in Macau, as the Cotai Central opening earlier this year was the last major supply addition in Macau until 2015-2016. Additional regional supply in Vietnam and the Philippines is scheduled to come on line over the next couple of years, and any impact on the Macau market bears watching closely. However, the regional demographics remain attractive, with room for further penetration. Junket operators might find it increasingly challenging to access credit as conditions tighten in China, but this has not proved a problem for larger junket operators yet. However, it could potentially have an adverse effect on smaller, less well-capitalized junkets. The VIP segment makes up slightly more than 70% of the overall market and, over the last several years, has grown faster than the mass market. However, we expect that to change over the next several years, with faster growth occurring in the mass market. The mass market will likely make up an increasingly larger portion of the market, as the next wave of supply growth starts to come on line in 2015-2016. Last week, Wynn Macau reported a 7.1% drop in second-quarter revenue, and Las Vegas Sands (LVS) reports earnings tonight. Reflecting the reduced near-term demand, we expect the market to struggle to absorb the additional supply (i.e. Cotai Central), thereby pressuring results of other properties for the next several months. (Caryn Trokie, New York Ratings Unit)

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