Chips down for Macau casinos with first decline in gaming revenue in more than a decade
Melco Crown Entertainment says it will delist from Hong Kong stock exchange as gaming hub suffers first revenue drop in over a decade
Casino operator Melco Crown Entertainment yesterday announced plans to delist from the Hong Kong Stock Exchange, after Macau reported its first decline in gaming revenue in more than a decade.
Melco submitted an application to the Hong Kong Stock Exchange to voluntarily delist from the main board, the company said, adding that it intended to retain the listing of its American Depositary Receipts (ADRs) on Nasdaq.
Casino revenue in Macau fell 2.6 per cent in 2014 to 351.5 billion patacas (HK$332.7 billion), after a record 30.4 per cent monthly decline in December, according to the city's Gaming Inspection and Coordination Bureau.
Last year's drop in revenue - which came amid an anti-graft drive and a slowing economy on the mainland - was the first since the territory liberalised the gaming industry in 2001.
Last month's takings - 23.3 million patacas - were the smallest in the year, marking the seventh straight month of decline.
"We forecast a 9 per cent gaming revenue decline in 2015," said CLSA analyst Richard Huang. "Business will remain tough in 2015, especially in the first half."
A research report by Barclays Research forecast the drop in gaming revenue to "persist through the first half of 2015".
Just last February Macau reported a 40.3 per cent gaming revenue growth, thanks to the droves of mainland tourists who visited the city during the Lunar New Year holiday. The poor run began after Beijing started to crack down on corruption and the mainland economy began to slow. The central government has also restricted the use of UnionPay debit cards in the enclave to curb illegal money transfers from the mainland.
Visiting the former Portuguese colony in December to celebrate the 15th anniversary of its handover to China, President Xi Jinping stressed Macau should diversify its economy and transform into a global tourism and leisure centre. It was a message widely interpreted as a call to broaden the economy beyond gaming.
A note by Macau-based Union Gaming Research said the message would dent gaming revenue and estimated a 20 per cent year-on-year decline in the first quarter. CLSA forecasts a 29 per cent fall.
Shares of casinos listed in Hong Kong fell 32 to 51 per cent last year, compared with a 2 per cent decline in the benchmark Hang Seng Index. Sands China and Galaxy Entertainment were the second- and the third-worst performers on the Hang Seng Index last year. Melco Crown's stock shed about 45 per cent.
All six casino operators saw their shares stumble yesterday. Wynn Macau fell the most, down 3.7 per cent. Melco Crown was down 2.7 per cent to HK$64.
With a market capitalisation of HK$104.6 billion, Melco Crown is majority-owned by co-chairman and chief executive Lawrence Ho Yau-lung, son of gaming tycoon Stanley Ho Hung-sun.
The main reasons given by the company for delisting the stock included regulatory compliance obligations that "involve significant additional costs". Since listing in Hong Kong in late 2011, "opportunities to raise equity in Hong Kong have not arisen, and the volume of trading remains very limited", Melco added.
Analysts estimate Melco's revenue fell 4.8 per cent to US$4.84 billion last year.
