Compared with Las Vegas casinos, which rely heavily on less-profitable non-gaming businesses, Macau resorts make up to four times more in earnings before interest, depreciation and amortisation than Las Vegas properties, according to CLSA, the Asian brokerage.
CLSA projects that even including the substantial costs of building new casinos and the backdrop of a slowing Chinese economy, the six Macau casino license holders listed in Hong Kong and the US will generate a record $3.8billion-$5.7billion in annual free cashflow in 2013 and 2014.
But the prediction assumes the continuation of favorable policies from Beijing – which is not a certainty. Last month, a vice-president of Agricultural Bank of China was arrested for allegedly using illegal proceeds to gamble in Macau.
“High profile cases like [that] could potentially have a profound impact on the gaming industry in Macau,” says Aaron Fischer, head of consumer and gaming research at CLSA.
It may have been coincidental but shortly after the arrest, a local newspaper in Macau reported that Beijing was tightening visa restrictions on independent travel from the mainland. The Macau government said it was not aware of any change but the number of independent visitors to the gaming enclave fell in the first quarter, the first decline since 2009.
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