Asia Gaming: Fitch sees good bet on region’s gaming industry

Fitch sees good bet on region’s gaming industry

Fitch sees good bet on region’s gaming industry

By WONG WEI-SHEN
weishen.wong@thestar.com.my

PETALING JAYA: An increase in middle-income earners and high-net-worth individuals coupled with growing tourism could bankroll the regional gaming industry to become the global market leader by the end of 2015.

Fitch Ratings projects the Asia-Pacific region's casino gaming market to be worth US$80bil (RM244bil) by end-2015, scoring a royal flush in the global market leader stakes. The rating agency forecasts the region's market share of global casino revenue to reach 44% by then.

This is on the back of a burgeoning middle-class and the increase in high-net-worth individuals. Also, a more stable macroeconomic environment compared with the United States and Europe will enable continuous revenue growth.

Additionally, the region boasts consumers with a higher propensity to gamble and the likelihood of legalisation and expansion of new jurisdictions.

Focusing on Malaysia, Fitch expects the gaming industry to record a mid-single-digit growth in revenue this year, driven by rising per capita income, robust visitor numbers and the upgrade of facilities. Resorts World Genting (RWG), which is owned by Genting Malaysia Bhd, monopolises the sector in the country. Gaming revenues in Malaysia have been resilient amid the global economic downturn. At the height of the subprime crisis between 2008 and 2009, RWG still managed to record a 1.4% growth in revenue.

Despite the rating agency's forecast of a lower real gross domestic product (GDP) at 4% this year, it expects revenues to remain sturdy, underpinned by the mass market and day-trippers.

On Wednesday, New York governor Andrew Cuomo announced a plan to build three casinos in upstate New York to boost tourism.

In a Bloomberg report, Citigroup analysts said Cuomo's plan to expand the gambling industry in the state was “negative” for Genting Malaysia.

“We believe the three casinos will be full-fledged with table games, but Resorts World New York (RWNY) will probably remain a slot-only racino. Allowing table games at RWNY would likely cannibalise the three casinos in upstate New York, which would work against the government's attempt to help the economy in upstate,” analysts said.

Yesterday, Genting Malaysia's shares fell as much as 14 sen to RM3.61 at market closing. While Singapore's two integrated casino resorts Marina Bay Sands (MBS) and Resorts World Sentosa (RWS) pose stiff competition, RWG could benefit from stricter gaming regulations in Singapore.

Singapore's Casino Control Act aims to deter Singapore citizens and permanent residents from excessive gambling. Any changes to the Act could negatively impact its attractiveness to the VIP segment, but could provide potential upside for Malaysia's VIP volume, said Fitch.

“RWG plans to invest RM300mil over the next two to three years to construct a 700-room hotel to cater to the growing demand,” it said.

The success of both MBS and RWS, which is boosting tourism and earning additional tax revenues via a levy of gaming tax, has prompted neighbouring countries Vietnam, Cambodia, Japan and Taiwan, among others, to expand or set up casinos.

Fitch believes it is likely that new markets in the region will liberalise gaming laws over the next decade.

At present, the largest gaming market in the world, Macau, is the only location in China to offer legalised casino gaming. In 2011, annual gaming revenues rose 42.2% to US$33.6bil (RM102.48bil) from a year ago.

Sands China, Wynn Macau, Melco Crown, Galaxy Entertainment, MGM China and SJM Holdings will be setting up a resort in Macau, involving more than US$11.5bil (RM35.08bil) in investments. The casinos should be fully operational between 2015 and 2017.

Fitch forecasts a growth in Macau's gaming and non-gaming revenues on the back of more Chinese citizens moving to urban centres in China, the introduction of new transportation infrastructure and the imminent increase in hotel room inventory. “Macau should grow in line with China's GDP,” the rating agency said.

Macau's gaming centres could potentially face competition should Korea, Japan and Taiwan legalise gambling. However, Fitch believes the South-East Asian market willd be able to absorb additional market capacity without a significant negative impact on Macau.