AUSTRALIA

Trade tensions shrink VIP business

Australia’s casinos are once again feeling the fallout from an economic slowdown that’s out of their hands, with VIP gamers from China staying for shorter periods and spending less, according to one of the country’s leading operators.

In June, the Star Entertainment Group said it was cutting its EBITDA forecast for fiscal 2019 after VIP revenue continued to decline in the second half. It warned that it was not seeing any signs of an imminent pick up.

The group reported that turnover in its international VIP business had slumped about 31 percent from January to early June compared with the same period a year earlier.

The China-U.S. trade tensions and subsequent slowdown in Mainland China’s economy are hitting sentiment among high rollers with many pulling in the purse strings. Despite a large domestic base, Asia and in particular Chinese gamblers, have been the main engines for growth.

Performance figures had just been recovering following a disastrous drop off in late 2016/2017 in the wake of the arrest of Crown Resorts’ employees in China on gambling-related charges.

Analysts don’t expect the fallout to be limited to Star this time around either, with casinos across the region seeing a dropoff in VIP business. Crown Resorts, which is building an ultra-luxury property in Sydney targeting Asian gamers, is also forecast to feel the pinch.

Adding to the pain, Star said it was seeing a slowdown in its domestic business, with revenue growth in the second half slowing to just 0.3 percent.

As a result, it now expects full-year normalised EBITDA to be in a range of $550 million to $560 million, down from $568 million in the prior year. That’s some 3 percent below its original forecasts.

“The slowing of domestic growth in 2H FY2019 reflects a combination of more challenging macroeconomic conditions across our markets, lower hold rates on table games in private gaming rooms and the impact of disruption from capital works at The Star Sydney,” the company said in a statement.

Star CEO Matt Bekier was cited by local media as saying the VIPs were only spending a couple of days at the casino, rather than the week they may have spent beforehand.

“The positive is the customers are still coming,” Bekier was cited as saying in the Sydney Morning Herald. “They just don’t spend as much and take as many risks as they did in the past.”

To mitigate the impact of the slowdown, Star said it would accelerate a package of already planned cost cuts. It aims to shave $40 to $50 million off expenses, with three quarters of the cost benefits being in place by the September quarter. Part of the measures will include the loss of about 300 to 400 non-consumer facing jobs.

Star owns properties in Sydney, Brisbane and on the Gold Coast and is in the process of a major development project in downtown Brisbane together with a consortium of Asian investors, including Hong Kong’s Chow Tai Fook Holdings.

Meanwhile, after untangling itself from its Asia ties just two years ago, Crown Resorts is back with former joint venture partner Melco Resorts & Entertainment. Billionaire James Packer sold an almost 20 percent stake to Melco for AS$1.75 billion ($1.2 billion), with the Macau operator indicating it would be keen to increase its holdings still further.

“The 20 percent acquisition is not the end goal, but most likely a first step in MLCO eventually taking a controlling ownership stake and potentially an outright acquisition of CWN,” Bernstein wrote in a note. “A full acquisition of CWN would have solid strategic rationale as it would allow MLCO’s junket relationships and customer database to strengthen the Australian business’ highend operations.”

Spintec debuts in Australia

Spintec, a maker of electronic table games, is planning further expansion in Southeast Asia this year and made its market debut in Australia in May.

Primoz Krsevan, Spintec’s regional sales manager, said in an interview at G2E Asia in Macau that Spintec has just installed its first product in Australia in the Epping Club in Sydney, which he says will be an interesting market for the company.

The property was founded in 1919 as a social club by ex-servicemen returning from World War 1.

“It’s a very big market and not many producers are there because it’s very specific and it took us quite a while,” he said.

“We’ve been working on the project for almost two years…roulette and baccarat for now and slowly we will add games.”

Aristocrat six-month profit gains on U.S., digital business

Aristocrat Leisure reported a 16.8 percent increase in NPATA in the six months ended March 31, 2019, driven by strong growth in the group’s Americas and digital businesses.

Normalized profit after tax and before amortization (NPATA) reached A$422.3 million in the period, compared to just A$361.5 million in the prior year period.

The company said the results were also helped by a further lift in performance across the Australia and New Zealand region

. Total revenue increased 35 percent, reaching A$2.1 billion.