The economic slump plaguing the Macau gambling industry has taken a bite out of Emperor Entertainment Hotel Ltd. as the hotel casino operator sees its profits plunge by 49 percent year-on-year.
Tracking the same downward trajectory taken by its peers in China’s premier gaming hub, Emperor’s profit halved to HK$256.2 million (US$33 million) in the 12 months to March 31, 2016 compared to the
HK$504.3 million (US$81.78 million) in the previous year.
Emperor, which operates the Grand Emperor Hotel and casino in downtown Macau as well as the non-gaming, 287-room Inn Hotel Macau, cited Macau’s sputtering economic activity as a major factor why it has slumped in 2016.
The group blamed the loss on fair value changes in investment properties and an impairment loss on prepaid lease payments; and an exchange loss on offshore traded renminbi [Chinese currency] deposits held by the group due to abrupt devaluation of the renminbi in August 2015 for the dismal profits.
“The operating environment in Macau remains challenging amid macroeconomic uncertainties, regulatory headwinds and intensified competition. In face of tough conditions, the Group strives to mitigate the adverse impact by optimizing gaming mix, maximize table utilization and improving operating efficiency,” Emperor said in a disclosure to the HongKong Stock Exchange.
As of March 31, 2016, the group stated that Grand Emperor Hotel’s casino – operating under the SJM Holdings Ltd gaming license – had 67 mass-market tables; 188 slot machine seats; and a self-managed VIP gaming room with 10 tables. It also reported that the slot machines decreased by 12 even if the table count remained the same for 2016.
Still, Emperor posted a 16.2 percent, year-on-year gaming revenue decline at HK$1.45 billion (US$ 186.91 million). Such revenue accounted for 84.3 percent of the group’s total revenue.
If there’s one silver lining, revenue from VIP gambling – which accounts for 30.7 percent of Emperor’s total revenue – has grown by 4.5 percent to HK$527.5 million (US$68 million) compared to HK$504.7 million (US$65.05 million) in 2015. Average win per table per day increased to HK$253,000 (US$ 32,612) at the end of the reporting year from HK$ 243,000 (US$ 31,323) in 2015.
The group’s earnings before interest, taxation, depreciation and amortization (EBITDA) – after accounting for non-controlling interests – fell 18.0 percent year-on-year, to HKD520.6 million. The firm said its EBITDA margin – after accounting for non-controlling interests – was 30.2 percent.
Despite a challenging year, Emperor contends that Macau is now on the road to recovery as it showed signs of stabilization after massive correction for consecutive months since 2015.
“The rising income levels among Chinese, together with improving cross-border connectivity brought by infrastructure enhancement such as the under-construction of Hong Kong–Zhuhai–Macau bridge, light-rail system connecting to Mainland China and expansion of border gates in Macau, will strength the competitiveness of Macau as a premier global gaming and entertainment destination,” Emperor said.“The Group is cautiously optimistic about the prospects for tourism and the gaming market in Macau and continues to seek expansion opportunities in the city.”