Deutsche Bank analysts recently took a trip to the top gambling hub in the world, Macau, China, to get a first-hand look at the struggling gaming industry. This week, analyst Carlo Santarelli released a report with a list of five positive and five negative takeaways from the firm’s Macau visit.
Negatives
Even though gaming revenues and share prices of the major Macau casino operators have fallen dramatically in the past year, Deutsche Banks doesn’t believe that Macau is out of the woods just yet. Santarelli mentions five remaining negatives:
1. VIP liquidity continues to suffer as credit in Macau’s junket system remains tight.
2. A smoking ban is a near certainty, but 2016 consensus gross gaming revenue (GGR) estimates have not factored in the potential ban.
3. Promotional spending for the operators is on the rise and will likely be boosted further by the opening of Macau Studio City later in 2015.
4. Operators will face margin pressures from retail operations, as over 1 million square feet of new retail space is expected to come onto the market in Cotai in coming years.
5. Fixed cost escalations from new projects will continue to weigh on earnings.
Positives
Despite the major headwinds, Santarelli also mentioned…
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