(July 24): The dice is rolling again in Asia’s casinos after a lull period when many high rollers were scared away by China’s anti-graft campaign a few years ago.

Asian gaming markets that are seeing the return of these players are Macau, Malaysia and Cambodia, say analysts. But the reasons for their return differ in each market, they add.

The rise in Macau’s gaming scene is attributed to the loosening of liquidity conditions in China in 1H2016 and improving sentiment.

Vincent Khoo, head of research and gaming analyst at UOB Kay Hian, explains that when it comes to Macau, there are two time periods — the back view and the front view.

“For the back view, the first half of the year has been very good. There is continuing growth in premium mass and some of the VIPs are coming back,” he tells The Edge Malaysia. “This year seems to be the first substantial recovery since the slowdown in Macau that started a few years back. The question is, will the new measures imposed to limit mainland Chinese access to funds substantially hamper growth?”

The Chinese government recently announced that it is clamping down on cash withdrawals from ATMs, or automated teller machines, in Macau, where withdrawals cannot be done from machines that do not have facial recognition technology.

“The idea behind China’s curb is to limit each legitimate overseas withdrawal by the Chinese, be it for gaming or non-gaming purposes. That has created some worry for the front view of the gaming industry in Macau, as the current changes could cut off some credit for some of the players to gamble there.

“The curbs coming in and some slowdown we are seeing in China could affect the gaming market in Macau, as it might reduce the current momentum,” says Khoo.

An analyst with a Malaysian bank remarks that punters are back, a situation he attributes to the loosening liquidity conditions in China in 1H2016. “We are feeling the impact of the monetary policy in China over a year ago, so with credit growth tightening now, we could be reaching the peak and may see the recent growth in Macau reverse later on,” he says.

In a July 3 report, Nomura Research lifted its 2017 forecast for gross gaming revenue (GGR) growth for the second time this year from 12% to 15%. It was increased from 8% to 12% on March 30.

“That was led by the solid second-quarter [performance], with GGR growth accelerating to 22% (from 14% in 1Q). In 2018 to 2019, we are forecasting GGR growth of 4% to 6%, as we remain unconvinced by the sustainability of VIP growth, while we expect supply-led mass-gaming growth to continue,” it states.

OCBC Research also revised its forecast for GGR growth for Macau from 5% to 7% y-o-y to 12% y-o-y for 2017. This, the research house says, is due to the rosy performance of both the tourism and gaming sectors there.

“Due to the global recovery, visitors from Taiwan, Japan and South Korea continue to be attracted to Macau. Meanwhile, China’s economic stabilisation and its political issues with Taiwan and South Korea have translated into Mainland tourists’ higher preference for Macau and Hong Kong as their travel destinations.

“Furthermore, a combination of hotel promotions and the effect of public holidays have lent support to the tourism and gaming sectors,” OCBC Research says in a July 3 report.

As for Malaysia, gaming analysts concede that the extra capacity in Genting Highlands has certainly driven up demand.

“The gaming revenue at Genting Highlands has increased by double digits y-o-y in percentage terms for 2Q2017 since the opening of Sky Casino,” says one analyst.

Genting Malaysia’s Sky Casino, which had its soft opening on March 30, has attracted demand. “Y-o-y, you have a 20% increase in capacity, although demand growth may not match the extra capacity,” says Khoo. “Time will tell whether the novelty factor will wear off. Also, whether the level of returns Genting will get from gaming and non-gaming compared with the investment it is pumping into the whole transformation project will command an attractive return on investment.”

UOB Kay Hian has a “buy” call on two gaming companies in the region, namely Bursa Malaysia-listed Genting and Hong Kong-listed Sands China.

“Sands has been going through a bit of a consolidation. We like Sands because it is more focused and dependent on the mass market … and the mass market is where we expect the industry growth to be from here on,” Khoo reveals.

As for Genting, he says he likes the stock for three reasons.

“In principle, there are some interesting catalysts that should benefit the group as a whole. Genting is an indirect beneficiary of Genting Malaysia and there is expected growth from the opening of the 20th Century Fox World [theme park]. The other subsidiary is Genting Singapore, which is believed to be a strong contender for [a gaming licence in] Japan.

“On its own, I think by next year, some focus will be on the opening of the Las Vegas casino. Looking at the Genting stock today, valuations remain attractive, as it has come down substantially from this year’s peak,” says Khoo.

On July 13, Genting announced that it was breaking ground on its US$400 million ($548.1 million) project near New York’s John F Kennedy International Airport.

Year to date, the stock has a total return of 18.62%.

In Cambodia, NagaCorp’s integrated hotel casino complex NagaWorld — located in Phnom Penh — saw GGR surge 40% to US$386.8 million in 1H2017. For the six months ended June 30, net profit rose 20% y-o-y to US$150.6 million.

While the growth in gaming demand varies across Macau, Malaysia and Cambodia, one common factor is the rise in Chinese tourists in the region, analysts point out.

“Singapore still remains flattish and things in the Philippines have slowed down a bit, owing to the robbery incident,” says one analyst.

It was reported that a gunman stormed the Resorts World Manila casino on June 2, setting gaming tables alight and killing at least 36 people.

High rollers returning to Asia’s gaming tables

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