Galaxy Entertainment, the $158 billion casino firm, will open two highly anticipated properties in Macau in a couple of weeks, and it could be a disaster.
That's because the government has yet to allocate gaming tables to the $3 billion projects.
The opening date is May 27, and the government confirmed that it received table requests from Galaxy for both the Galaxy Macau phase 2 and the Broadway Macau on April 15.
So yeah, that's cutting it a little close to the wire.
"Government officials commented recently that they have not decided on the number of gaming tables to be allocated the projects," UBS analysts wrote in a recent note. "We think the market expects around 150 new tables for Galaxy and an allocation below that could be negative to sentiment. Recently there has been busy activity on the existing Galaxy Macau main floor in re-positioning tables, slots and ETGs which could be in preparation for the re-allocation of some tables to phase 2 from phase 1. We also expect a few junkets (less than 3-4) to have the appetite to open new VIP rooms in Galaxy phase 2."
The Chinese government has been cracking down on casinos in the world's largest gambling hub since the summer of 2014. It started by going after the junkets — companies that provide funding for high-rolling gamblers — as part of President Xi's wide-ranging anticorruption drive.
Since then, retail gamblers have been scared away by visa restrictions, debit-card monitoring, and a smoking ban. The government put a cap on visitors from mainland China, destroying the idea that more projects might mean a higher volume of retail gamblers to make up for the loss of the VIP crowd.
As a result, Macau gaming revenue has broken in half, and casino stocks like Wynn Resorts, Las Vegas Sands, and others have broken right along with it. For its part, Galaxy's stock is down 37% over the last year.
According to analysts at Wells Fargo, Macau's gaming revenue could decline up to 36% from May 2014. The bank foresees Galaxy's stock down 20% compared to this time last year as well.
Galaxy's probably waiting by the phone on this one.
