Wednesday, August 31, 2011

Stable outlook for Resorts World Malaysia, says Moody's

KUALA LUMPUR: The development of new casinos and resorts in Singapore is not expected to materially cannibalise the performance of Genting's Resorts World Malaysia given its monopoly operation in Malaysia, according to Moody's Investors Services.

Moody's said the outlook for Resorts World Malaysia was stable.

'Moreover, about 70% of Resort World's revenues come from day-trippers and local residents.

'These customers are less mobile and form a stable base for the Malaysian casino's revenue streams,' it said in a report entitled "Asia-Pacific's Gaming Sector Outlook: Growth Continues in Macau and Singapore; Steady in Australia and Malaysia' on Wednesday, Aug 31.

Moody's said the outlook for the Asia-Pacific gaming sector was stable with a positive bias.

Kaven Tsang, a Moody's assistant vice president and analyst said the outlook reflected the agency's favorable expectations for the fundamental credit conditions of Macau and Singapore's gaming sectors over the next 12 to 18 months, partly offset by likely flat growth in Malaysia and Australia.

"We expect the gaming sectors in Macau and Singapore to continue to grow in the near term, but the uncertain macro-economic environment is likely to slow the pace of the growth,' said Tsang, who is also the author of the report.

The report said Macau's gaming revenues could increase 15% to 25% annually, driven by: 1) growth in the VIP business due to an increase in credits from casinos and junkets, 2) the Renminbi's appreciation and rising income of Chinese households, both of which are conducive to leisure travelling and game spending, 3) the opening of new casinos.

"At the same time, Macau's cap on gaming tables until 2013 will prevent excessive competition for Melco Crown Gaming (Macau) Ltd (Ba3 stable) and Macau's five other concessionaries and sub-concessionaries," said Tsang.

For Singapore, Moody's expects gaming revenue to grow in the double-digits over the next 12 to 18 months, helped by limited competition and a favorable outlook for the macro-economic environment in Southeast Asia as well as Singapore.

The gaming sector's growth in Australia and Malaysia will remain flat, said Moody's.

For Australia's Crown Limited (Baa2 stable), defections of VIP gamblers to Singapore could be stemmed by the company's multi-year program to upgrade facilities, it said.

Crown's VIP segment's revenue slipped 0.2% on-year for the fiscal year ended June 30, 2011; but this was offset by a 5.6% increase in mass-market turnover during the same period, it said.

The report said Moody's could change Asia Pacific's gaming sector outlook to positive from stable if: 1) gaming revenues in two or more major gaming centers -- Macau, Singapore and Australia -- register growth exceeding 20%-25% on-year on a sustained basis, and 2) gaming operators maintain their profitability without a major increase in exposure to business volatility.

The sector's outlook could be changed to negative if: 1) the gaming sectors experience consecutive declines in monthly and quarterly gaming revenues due to weak macro-economic factors, 2) local or regional competition increases and leads to a material decline in the gaming operators' profitability, and 3) the gaming operators re-commission fast debt-funded expansion, thereby dramatically weakening their financial and liquidity profiles, according to the report.

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