Singapore's 2019 gaming industry to suffer spillover effects of VIP weakness: Fitch

Singapore's 2019 gaming industry to suffer spillover effects of VIP weakness: Fitch

By: 
Michelle Zhu
27/11/18, 05:15 pm

SINGAPORE (Nov 27): Fitch Ratings has identified Singapore to be among the markets vulnerable to weakness from China's VIP gamblers, resulting in a flat VIP segment next year.

This is considering how Singapore’s gross gaming revenue (GGR) declined 3% on-year in 1H18 after growing 14% in 2017, with the recent weakness largely driven by the slowing VIP segment across Southeast Asia and facing higher competition from expansions in the Philippines as well as other newer markets.

In all, Fitch assigns a “stable” sector rating outlook on global gaming growth for 2019 despite an anticipated deceleration of global gaming growth as China’s economy slows down, European regulations stiffen, and the near-decade-long recovery on the Las Vegas Strip tapers.

Given China’s growing middle-class, it considers China’s market as underpenetrated, and is forecasting mid-single-digit growth to reflect a long-term positive outlook.

“Our forecast is tempered by the tougher y-o-y comparisons and the risk of a weakening Chinese economy. Fitch forecasts 6.1% 2019 China GDP growth, a slowdown from 6.6% forecasted 2018 growth,” says the ratings agency in its latest 2019 Outlook: Global Gaming report.

In Asia Pacific, Fitch thinks ratings are at already-elevated levels of capex and VIP-related volatility.

While the agency has identified Macau as particularly vulnerable to a Chinese slowdown, it believes the opening of Grand Lisboa Palace, ramp-up of MGM Cotai and Morpheus tower at City of Dreams, and new infrastructure projects will contribute to global gaming revenue (GGR) growth in the long run.

“Macau’s VIP segment, which has fueled much of the growth in 2017 and early 2018, slowed with the mass market as the primary growth driver over the past few months. We expect this trend to continue into 2019 as VIP is more sensitive to the economic and credit conditions on mainland China,” says the agency.

In Fitch’s view, fundamentals for the Malaysian gaming market remain stable, underpinned by a domestic mass-market focus at Resorts World Genting.

“Visitor arrival growth will be driven by new attractions and the 2019 opening of the 20th Century Fox theme park. However, the proposed revision of casino duties to up to 35% of net collections announced recently will likely pressure margins at Malaysia’s sole gaming operator, Genting Berhad,” notes Fitch.

Going forward, Fitch opines that the growing US economy will continue to shield its regional operators from market saturation, an ageing demographic and growing competition in the form of gambling and entertainment alternatives.

It believes most US gaming operators now have their leverage profile growth within target ranges as they focus more on returning capital to shareholders.

Elsewhere, the agency highlights that recent consolidations in EMEA (Europe, the Middle East and Africa) have put bookmakers on a “more solid footing” to absorb adverse regulatory changes, such as the UK’s potential tax hike for online gaming in April 2019.

One wildcard to pressure ratings, however, is a ramp-up in debt-financed mergers and acquisitions (M&A) especially for US and EMEA.

“For Australian operators, resilient underlying domestic demand and a favorable regulatory environment continue to be the main factors supporting our expectation of stable cash and EBITDA generation in 2019,” adds Fitch.

HNA unit's lenders seize assets as payment deadline missed

(Apr 23): Lenders to HNA Group Co.’s CWT International seized control of assets in Singapore, China and the US after the unit failed to repay amounts due on its credit facility. Assets that are being taken over include shareholdings of Singapore-based CWT, with investment properties in the US and golf courses in China, according to a statement. Lenders had threatened to take control of the assets unless CWT made payments by 9 am on April 17 tied to a HK$1.4 billion ($242 million) loan taken out in September. Operations of CWT are continuing as usual and trading in CWT International sha....
Read More >>

Billionaire Kwek keeps it in the family with luxury condo sales

SINGAPORE (Apr 23): Billionaire property developer Kwek Leng Beng’s latest luxury condo in Singapore has seen robust demand since its launch last month. It doesn’t hurt that some of his own relatives have rallied to the cause. Kwek’s son and daughter-in-law, Kingston and Cecilia Kwek, spent $9.8 million on an apartment in Boulevard 88, according to a City Developments exchange filing late Monday. His nephew and City Developments’ group chief strategy officer Kwek Eik Sheng snapped up another unit on one of the upscale project’s lower floors for a more modest $4.3 million. Kwek ....
Read More >>

Don't underestimate the recovery potential of this education stock: UOB

SINGAPORE (April 23): UOB Kay Hian is starting coverage on Overseas Education Limited (OEL) at “buy” with a 46 cent price target, based on 10.4 times EV/EBITDA or a 15.4% discount to global peers’ 2019 average. In an initiation report on Tuesday, analyst John Cheong says he deems the stock’s valuations attractive at its current 8.3 times 2019F EV/EBITDA and an 8.2% dividend yield. Cheong views this yield level as sustainable due to OEL’s strong operating cash flows despite the recent relocation of its Orchard Road campus to Pasir Ris due to lease expiration. Although the mov....
Read More >>