Dividends over growth: Morgan Stanley on Asian casino industry
The era of breakneck capital appreciation in Asian gaming is giving way to a “mature” market where investors should hunt for dividends rather than explosive growth. Speaking at the G2E Asia in Macau, Praveen Choudhary, Managing Director and Head of Asian Gaming at Morgan Stanley, argues that while top-line recovery is evident, the industry is grappling with a fundamental shift in profitability.
“Most CEOs of any other industry love predictability in their business,” Choudhary noted. “[The] gambling business is the only business where CEOs actually like unpredictability because that’s the business model.” However, he warned that the structural landscape is changing: “A lot of gaming markets are getting mature, and some of them have not started yet.”
Macau’s margin trap: GGR recovers, but costs bite into operator profits
In Macau, the mass market has fully recovered to 2019 levels, but operators’ financial profiles have evolved. “The negative part, on the other hand, as an analyst, is the margin,” Choudhary explained. “It’s coming down every year while your revenue has been going up.”
Despite the “collapse” of the traditional VIP sector, Choudhary highlighted a surprising trend. “In the last two years, VIP growth has been faster than mass. The junkets are coming back. Junkets are allowed. They have not been officially shut down.” Yet, he cautioned that the days of high rollers betting are gone.
“Over time, [the] market will realise that Macau is getting much more stable and they’re becoming mature. They’re about to give you dividends, so you can buy it for dividends rather than for growth.”
Singapore’s wealth explosion: Mass revenue hits 187% of pre-pandemic levels
Singapore has emerged as the standout performer, defying global trends. “Singapore has been crazy, very good, ” Choudhary said, pointing to mass revenue reaching 187 per cent of 2019 levels. This surge is decoupling from simple tourism numbers. “It is driven by wealth accumulation in Singapore. It is not about visitors who come to gamble. It is wealthy people staying in Singapore.”
The migration of high-net-worth individuals to the city-state has created a new, stable gambling class. “If you pay a hundred thousand Singapore dollars to one of the casinos, you become a VIP customer,” he noted, explaining that this tier allows casinos to pay 10 per cent less tax on those players compared to the general public.
Philippines falters while Japan remains a distant dream
The outlook elsewhere is less certain. In the Philippines, Choudhary said that the market is struggling, with South Korean and Chinese visitation falling despite visa-free entries. According to the latest Philippine Amusement and Gaming Corporation (PAGCOR) data, the country recorded a 6.39 per cent increase in its gross gaming revenue (GGR) last year, amounting to PHP396.14 billion ($6.6 billion). The bulk of that was largely fuelled by a surge in online and electronic gaming, which offset a notable decline in land-based casino revenues.
Regarding Japan’s market entry, Choudhary remained sceptical of the 2030 timeline. “I think I’m going to put my neck out to say it won’t open in twenty thirty. That’s all I can say,” he said. However, earlier this month, MGM Resorts International reported steady progress on its Japan integrated resort.
For the UAE, he described the market as making “a lot of sense” due to its monopoly status and luxury focus, though he warned that regional geopolitical concerns may cause “a little bit of delay in opening,” he noted. Last week, Wynn Resorts said that construction of Wynn Al Marjan in the United Arab Emirates (UAE) is likely to be delayed, as the war in Iran continues to disrupt construction timelines and investor confidence.
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