Bangkok--16 Apr--Moody's Investors
Moody's Investors Service is maintaining its negative outlook for Asia Pacific's gaming sector over the next 12-18 months and, in particular, for each of the three casino and resort centers of Australia, Malaysia, and Macau.
Since the publication of its most recent sector outlook in November 2008, Moody's has taken one rating action when it downgraded Galaxy Casino in January by two notches from B1 to B3, with a negative outlook, on concerns over pressures to its cash flow and financial position after its decision to postpone the opening of its Galaxy Macau Resort.
Kaven Tsang, a Moody's Assistant Vice President and Analyst, says, "Although month-on-month revenues in each of the region's three markets have remained relatively stable, we see no material positive developments that would change our outlook."
Tsang adds, "For Macau, we expect a material decline in revenues for the first half of this year compared with a very strong, first six months in 2008 as mainland authorities maintain restrictions on visitations and junket operators continue to curtail credit to high rollers."
Tsang notes, however, that competitive pressures in Macau have eased, saying, "We now expect about 25 percent fewer gaming tables at end-2009 than what we forecast last November. Weaker casinos in the enclave have reduced or closed their operations, and the development and opening of several mega casinos have either been suspended or postponed."
Tsang explains that City of Dreams, developed by Melco Crown, will be the only major new source of supply in the near-term.
With regard to Malaysia, Tsang says, "The business there is relatively steady. Nevertheless, an increase in regional supply, such as the opening of Sands' integrated resort in Singapore later this year and Genting's opening of its Sentosa resort next year, could weigh on visits to Genting's Highland Resort in Malaysia, particularly as some Singaporeans currently make day trips to gamble there."
Clement Chong, a Moody's Vice President and Senior Analyst in Sydney, says, "Australia is at the start of an economic downturn, and casino spending is discretionary, so there is likely to be some adverse impact from a recession."
Chong points out that Crown, the sole Australian gaming company rated by Moody's, has recently said it would no longer buy the Canary Casino in the U.S. Chong says, "If Crown uses the net US$1.2bn in savings from the foregone acquisition to pay down its debt, that could change the company's outlook to stable from negative."
Moody's rates four gaming companies in Asia Pacific (ex-Japan) with outstanding debt of approximately US$ 2.5bn. In rating such issuers, the rating agency uses its "Global Gaming" rating methodology from August 2005. The methodology is available at www.moodys.com under the credit-policy directory and rating-methodologies subdirectory.
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