Bangkok--6 Nov--Moody's
Moody's Investors Service has a negative rating outlook for Asia Pacific's gaming sector over the next 12-18 months. The sector currently includes casinos and resorts in Australia, Malaysia, and Macau, the region's largest such center in revenue and facilities.
In a new report, Moody's says the gaming industry in Asia Pacific is facing increasing operating pressures, which vary by company and country, but are primarily the result of one or more of the following factors:
slowing macro-economies causing cutbacks in discretionary spending, regulatory changes affecting visitations, and intense local competition.
The report's lead author, Kaven Tsang, a Moody's Analyst and Assistant Vice President, says, "Besides these immediate concerns, rated gaming firms face the challenge of managing large acquisitions or capital expenditure in uncertain regulatory, credit, and economic environments."
Tsang adds, "Operators in Macau face the dimmest prospects as incremental regulatory tightening on visits from the Chinese Mainland and intensifying local competition have already put pressure on some issuers'
profit margins and cash flows."
He notes that Malaysia's gaming monopoly faces other challenges. "The country's export-oriented economy is vulnerable to the global slowdown, and a sharper slowing in growth would put at risk the local, discretionary spending at casinos there."
A second author, Clement Chong, a Moody's Vice President and Senior Analyst, says, "Likewise, in Australia, a slowing local economy has darkened the outlook for the country's gaming sector because lower disposable incomes could lead to reduced spending at casinos. As a result, Moody's recently revised Crown's rating outlook to negative on concerns over the company's ability to achieve its financial targets."
Chong notes that a gradual liberalization of gambling in Taiwan, Thailand, Vietnam, and Japan and the coming online of integrated gaming resorts in Singapore, the Philippines, and Indonesia beginning in 2010 offer potential regional competition.
However, he says, "Moody's does not yet view these upcoming establishments as a significant near-term threat to Macanese, Australian, or Malaysian issuers. This is because of (1) the new supply will come online only in 2010 at the earliest, (2) the distinct demographic and geographic profiles of Macau's targeted customers, and (3) the reliance of Australian and Malaysian casinos on mainly local visitors."
Nevertheless, Chong concedes that such future competition adds to the challenges facing the sector in uncertain times.
The report is entitled "Asia Pacific's Gaming Sector: Negative Outlook on Economic Uncertainty". It is available at www.moodys.com.
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Hong Kong
Kaven Tsang
Asst Vice President - Analyst
Corporate Finance Group
Moody's Asia Pacific Ltd.
JOURNALISTS: (852) 2916-1150
SUBSCRIBERS: (852) 3551-3077
Sydney
Clement K. Chong
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Pty Ltd
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100