Asia-Pac casino gaming to become the global market leader by end-2015: Fitch

Singapore's casino to moderate as initial appeal fades.

Fitch Ratings expects casinos in Macau, Australia, Singapore and Malaysia to maintain their credit profiles. The established casinos have completed most of their expansionary capex, and the casino gaming market overall is projected to expand, it said. "Market shares and profitability of existing operators will potentially be impacted by the new casinos to come on line, but not to extent that credit profiles are materially impaired."

Fitch believes that gaming in the Asia-Pacific region is poised to continue significant near-term revenue growth. "This is supported by the burgeoning middle class and the increase in high-net-worth individuals; a mostly stable macroeconomic environment compared with the US and Europe; the high propensity of consumers in the region to gamble and the likelihood of legalisation/expansion of new jurisdictions."

According to Fitch, the Singapore market experienced impressive growth after the initial success of Resorts World Sentosa (RWS) and Marina Bay Sands (MBS), but regulatory changes are likely to lead to a slowdown there. Australia will experience high-single-digit growth fuelled by investment in VIP facilities by operators. Malaysia is likely to benefit from regulatory change afoot in Singapore while Macau should grow in line with China’s GDP.

Fitch projects the casino gaming market in the Asia-Pacific region to become the global market leader by end-2015, worth roughly USD80bn. "Greater affordability among the region’s consumers will drive the growth. Likewise, there is growing significance of increased tourism, both in terms of the number of visitors and US dollar receipts – vital for some of the countries in the region."

Fitch sees gaming Centres to increase moving forward. "Singapore’s success with RWS and MBS – which is boosting tourism and earning additional tax revenues through the levy of gaming tax – has prompted Japan, Taiwan, Vietnam, Cambodia and other countries to consider expanding or setting-up casinos."

No concrete announcements have yet been made regarding plans, but Fitch believes it is likely that new markets in the region will liberalise gaming laws over the next decade. Next Wave of Macau Investment: Sands China, Wynn Macau, Melco Crown, Galaxy Entertainment, MGM China and SJM Holdings are each putting up a resort in Macau, which involves more than USD11.5bn in investment. Fitch expects these casinos to become fully operational in 2015-2017.

Fitch notes that changes to Singapore’s Casino Control Act have the potential to hurt its attractiveness to the VIP segment. In Australia, a licence for a new VIP casino in Sydney is being considered by the New South Wales government, which would represent the first new licence in Australia for nearly 20 years.

Murmurs of gaming expansion persist, particularly in Japan and Taiwan. Fitch said that significant debt-funded investment in greenfield projects, which has the potential to affect liquidity, may lead to negative rating pressure.

Fitch’s current macro-economic forecast calls for modest re-acceleration of the Chinese economy. However, a Chinese domestic shock, or so called “hard landing” could pressure ratings, it said. "The impact would be most acute if a slowdown were to occur while the next phase of growth was being developed, as capital expenditures and leverage were increasing."