Macau halts gambling as typhoon deals latest blow to casinos

Casino Lisboa, center, stands before the expected arrival of Super Typhoon Mangkhut in Macau on Sept 15, 2018. (Bloomberg pic)

HONG KONG: All bets are off in Macau — for now.

The world’s largest gambling hub suspended gaming operations at all its casinos as Typhoon Mangkhut ripped through the region, in the latest setback for major operators including Sands China Ltd. and Wynn Macau Ltd.

Industry employees said this is the first time Macau has shut down gambling since licenses for casinos were given out in 2002. The suspension took effect at 11 pm on Saturday, the government said in a statement, citing the safety risk. Gaming operations will resume following a review of conditions once the typhoon has passed.

The shutdown is the latest blow to Macau casino operators after a rebound for the industry that began more than two years ago. Investor worries are growing over a pullback in spending by big gamblers as China faces an economic slowdown and uncertainties tied to the trade war with the US.

“This robs the month of one important weekend day,” which typically generate significantly higher gaming revenue than midweek days, said Grant Govertsen, analyst at Union Gaming Securities Asia Ltd. He said delays in restoring transportation to Macau will further affect revenue on Monday.

Govertsen said September’s revenue growth rate could be impacted by as much as seven percentage points, almost cutting in half the firm’s previous forecast of a 15% increase.

Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX, also expects to lower his outlook for the industry. He had previously projected year-over-year growth of about 10% for September. Lee said the decision to shut the casinos was the right choice to ensure employees’ safety, and noted that the industry is “still in positive growth territory.”

Junket operators and other industry officials expressed relief at the shutdown, praising the government’s decision.

“This is the first time in Macau history that all casinos halted operations, to ensure the safety of employees,” said Stephen Lau, president of Power Macao Gaming Association, an organization that represents casino workers. “We are seeing the government and casino operators no longer just put profit over the employees’ interest.”

The Bloomberg Intelligence index for Macau casinos is down 34% since the end of May, with MGM China Holdings Ltd. tumbling 45% while Wynn Macau and Melco Resorts & Entertainment Ltd. are both down 36%.

Typhoon Hato
Casinos in Macau have had 25 straight months of growth, boosted by high rollers and the opening of flashy new resorts on the Cotai peninsula. Operations were disrupted last summer by Typhoon Hato, which caused 10 deaths, according to Xinhua. While casinos continued to operate during that storm, the government estimated the economic loss to Macau amounted to 12.6 billion patacas (US$1.6 billion).

Casino stocks tumbled on Tuesday after Deutsche Bank lowered its forecast for revenue growth in Macau. It cut its 2019 outlook by more than half, to 4% growth from 11% previously, citing concerns about the VIP segment and saying Macau is at the start of a downward earnings revision cycle.

Morgan Stanley, however, wrote on Thursday that casino shares may be poised for a 50% rebound. Based on the last cycle that ended in July 2012, shares are set to recover on the back of improving earnings, it wrote in a note, helping a two-day rebound in the benchmark casino gauge.