Gloom For Gaming Sector ?

Source : The Straits Times, Nov 6, 2008

CREDIT ratings firm Moody's said on Thursday it has a 'negative' outlook for Asia's gaming sector in the next 12-18 months due to the economic uncertainty.

Casino operators in Asia's gaming haven of Macau will be the most affected, with the industry in Australia and Malaysia also expected to be hit, it said in a report.

'As in the US, the gaming sector in the Asia-Pacific is facing increasing operating pressures, which vary by company and country,' it said.

Cutbacks in discretionary spending, intense local competition and regulations on travel are expected to hurt the earnings of casino operators, Moody's said.

'In addition to these immediate concerns, gaming operators face the challenge of managing large acquisitions or capital expenditure in an uncertain environment,' it said.

The agency said the decline in revenues may worsen in Macau when new casinos open in the next six to 12 months.

The city's gaming revenues dropped 10 per cent in the third quarter, according to official figures, partly due to tougher visa restrictions on visitors from mainland China. It was the second consecutive quarter that gaming revenues fell there.

'In Australia, a slowing economy has darkened the outlook for the country's gaming sector because lower disposable incomes could lead to reduced spending at casinos,' Moody's said.

It said it recently revised its outlook for Australian casino operator Crown to negative 'on concerns over the company's ability to achieve its financial targets'.

Malaysia's gaming sector will also be impacted but a projected economic growth of 3.5 per cent in 2009 and the absence of local competition could support the industry, it said.

Moody's warned that 'aggressive expansion' by some casino firms amid the uncertain credit and economic environment contained risks and could result in project delays, but said the situation among its rated companies was manageable.

'No issuers have large maturing short-term debt and they have all secured financing for planned capex requirements or acquisitions.

'The challenge for some will be to ensure that planned capital expenditure remains within available funding,' it said. -- AFP