Fears grow for Macau gaming glut

The outlook for Macau’s gaming industry, which has been plagued by visitor restrictions imposed by the mainland government and commission caps, is expected to remain flat with a lack of catalysts, according to analysts.

„The recent events have compounded these fears [of a pending supply glut and its impact on the mass market players], and we see no respite in the third quarter,“ Citi analyst Anil Daswani wrote in a report.

The Macau government has announced that mainlanders issued travel permits to Hong Kong will not be able to visit Macau using the same visa beginning in September.

„We see this as the strong signal by the government to seriously control supernormal growth in the Macau gaming industry,“ said Deutsche Bank analyst Karen Tang.

KGI Asia chief operating officer Ben Kwong Man-bun said: „The sentiment for gaming stocks in Macau is weak. The competition between casinos is also fierce.“

Casino investor A-Max (0959) announced a profit warning last week, saying that its financial results for the year ended March 31 will be adversely affected. The company said it recorded a pre-tax loss for the period of HKD 1.23 billion, compared to a loss of HKD 119 million the previous year.

Citi said Melco International (0200) remained its top VIP play, but the operator’s target stock price was reduced from HKD 15.50 to HKD 7.43. The target price for Shun Tak (0242) was cut from HKD 8.74 to HKD 6.74, while Galaxy Entertainment (0027) was slashed from HKD 5.88 to HKD 4.54.

Tang said Macau’s new visa rules following earlier moves by the Guangdong government to tighten visa applications from twice a month to once a month, then to once every two months, would affect gaming revenues, although not much initially.