Macao's future still anyone's to bet on

While analysts last year correctly forecast Macao casinos would suffer a first-ever revenue drop, prospects for 2015 are looking as uncertain as a coin toss.

Those surveyed by Bloomberg News were evenly split on whether revenue will shrink or grow in the world's largest gambling hub this year. Gaming revenue fell 2.6 percent in 2014, ending a golden age in which growth spiked more than eightfold over a decade and transformed Macao into a gambling center larger than the Las Vegas Strip.

But conflicting signals are muddling the outlook. While the central government's campaign against graft and extravagance is keeping high-rollers from the Baccarat tables, company steps to target mass-market tourists are making some analysts more bullish even as China's economy cools.

"We are at the peak of uncertainty right now," said Grant Govertsen, a Macao-based casino analyst at Union Gaming Group. While the company downgraded the sector in June on the view that "the anti-corruption campaign was a lot more fierce than people were giving it credit for", it now expects single-digit revenue growth in 2015, he said.

The most optimistic analyst predicted casino revenue will rise 10 percent this year, while the most pessimistic expected a 9 percent slump, giving a median estimate of a 0.35 percent year-on-year growth from eight analysts surveyed last Friday.

Most agree that there will be an eighth straight month of gaming losses in January, which would beat a record losing streak in 2008-09 when revenue dropped seven straight months amid the global financial crisis.

The industry may fare even worse in February unlike last year's record sales over the Lunar New Year, traditionally a peak season for gamblers, according to Credit Suisse Group AG.

The brokerage estimates revenue will drop between 14 and 18 percent this month and the decline could widen in February.

Casinos are also grappling with weakening economic growth in China, as well as more scrutiny over junkets and stricter visa requirements that affect mainlanders going to Macao.

SJM Holdings Ltd said Macao's gaming industry will struggle to have a "breakthrough improvement", according to a Dec 31 internal memo obtained by Bloomberg News.

Macao, China's only city that legally allows casino gambling, is facing pressure from Beijing's tightening grip on money flows out of the mainland mostly by the high rollers who made up about two-thirds of its gaming revenue.

The government in Macao has restricted the use of China UnionPay Co's debit cards at casinos. The gambling regulator is also tightening scrutiny of agents used by junket operators which arrange trips and provide credit for Chinese high-stakes gamblers.

Analysts such as CLSA Ltd's Aaron Fischer and Union Gaming's Govertsen see the new resorts opening from mid-2015 as a silver lining as companies target mass-market customers amid a continued increase in visitors to Macao.

The number of mainlanders going to the city jumped 27.8 percent in November compared with the previous year, following a 20.5 percent increase in October.