Aaron Fischer: Macau’s Future is all about the Mass Market

The summary of Macau market today

In this interview with CalvinAyre.com’s Stephanie Raquel, Aaron Fischer of CLSA tells us why he is bullish about the Macau gambling market despite plummeting gaming figures in the last few years.

Plunging gross gaming revenues for 25 consecutive months and cooling economic activity in Macau have sent many investors on a conquest for business growth outside Asia’s premier gambling capital.

In June, Macau junket investor Iao Kun Group Holding Company (IKGH) bought Jeju Sun Hotel & Casino on South Korea’s Jeju Island from Philippine casino operator Bloomberry Resorts Corporation “to diversify outside Macau.

Casino investor Amax International – which operates gaming tables in Casino Greek Mythology in Taipa – is investing heavily in the Pacific island nation of Vanuatu as the income of its VIP gaming tables and slot machine operations in Macau continues to disappoint.

The tales of doom and gloom in Macau have rattled most businessmen in the China’s Special Administrative Region to the bones, but not Aaron Fischer of CLSA, who have even painted a rosy future for the beleaguered gaming hub.

Fischer pointed out that the Macau gaming market has already hit rock bottom when its revenue dipped from $29 billion to $15 billion. He maintains that its’ gambling market is already on its way toward recovery, albeit slower than most analysts expected.

“And with the rate of recovering now is more 4 percent per annum, so maybe it goes from 15 billion back up to 16 billion. So we don’t expect to see any V-shape recovery in the VIP,” Fischer told CalvinAyre.com. “Looking at the next three years, we think the growth rate is 7 percent per annum for three years. We believe that Macau has stabilized and we are now going to be in in a situation where we see more healthy growth.”

He said that Macau’s resurgence from economic slump over the next two to three years will be fueled mostly by the non-gaming segment of casinos. He thinks that Macau’s future “is all about the mass market” as it will grow by close to 10 percent per annum for the next three years.

Though gaming revenues in Macau have slowed down over the last two years, Fischer contends that the occupancy rate for many of the major hotels in the first quarter of this year is between 92 and 99 percent. He added that Macau will see a 40 percent increase in hotel capacity over the next three to four years.

Adding support to the growing mass market in Macau, according to Fischer, is China’s economic resilience, with gross domestic product (GDP) growth forecast managing to float in the 5 percent territory.

“Macau will get to about 45,000 hotel rooms, but it is still very low compared to what we see in Las Vegas, which is 140,000,” Fischer said. “We still see a lot of opportunities on the non-gaming side of hotels, and also for retail sales, while retails has been very weak in HongKong and in Macau the last two years, we think it could grow but more in the middle market and not so much in the luxury good market.”

Aside from Macau, Fischer is also bullish in terms of gambling revenue growth across Asia-Pacific region, particularly in the Philippines, Vietnam, Cambodia, and Saipan.

“We’re very optimistic on Asian gaming overall. I think some markets have been doing exceptional well this year,” he said.