Nomura Instinet said in a memo it was revising downward its forecast for fourth-quarter casino gross gaming revenue (GGR) in the Macau market against a business climate for the sector that was “more challenged than expected”. Brokerage Sanford C. Bernstein Ltd has also rejigged its fourth-quarter GGR numbers, it announced on Friday.
Nomura now thinks Macau GGR in the three months to December 31 will be down by 8 percent year-on-year, 300 basis points lower than a market consensus of a 5-percent decline.
The brokerage expects fourth-quarter VIP GGR to be down by 26 percent year-on-year, versus a -22 percent consensus; and mass GGR to be up by 14 percent, versus consensus’ increase of 12 percent.
Its forecast – issued on Thursday – is based on casino operator data; comparative information from the city’s regulator, the Gaming Inspection and Coordination Bureau, a body also known as DICJ; and data from Consensus Metrix; and proprietary research.
Brokerage Sanford Bernstein now estimates “fourth-quarter GGR to be -7 percent (VIP -26 percent and mass +9 percent),” wrote the latter’s analysts.
“Assuming our estimate holds, full-year 2019 will see GGR -3 percent (VIP -19 percent and mass +11 percent),” added the institution’s analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu, citing proprietary analysis and estimates.
A number of analysts has mentioned the ongoing United States-China trade war as a likely factor in the recent weakness in the Macau VIP gambling segment as rich Chinese – some of them owners of factories that export to markets including the U.S. – might be choosing to stay away from the gaming tables.
Nomura said one particular headwind for the fourth quarter was likely to be the timing in calendar-year 2020 of Chinese New Year, a festival linked to lunar movements and falling this time on January 25, as opposed to February 5 in 2019.
With a January timing of the festival, “customers often defer” December visits to Macau “into January for Chinese New Year,” said Nomura analysts Harry Curtis, Daniel Adam and Brian Dobson.
A number of brokerages has also speculated that China’s President Xi Jinping will visit Macau in December to mark the 20th anniversary of the city’s handover from Portuguese administration to that of China. Some analysts think such a visit might depress monthly GGR if some mainland Chinese players choose to stay away from Macau at that time. There has been no official word on any President Xi visit to Macau.
Sanford Bernstein noted: “Operators remain cautious about recovery prospects for Macau gaming in the fourth quarter, but are optimistic that VIP deceleration is stabilising and (close to) hitting a bottom.”
Linda Chen, vice chairman and chief operating officer of Macau casino operator Wynn Macau Ltd, told GGRAsia last week she expected Macau’s overall casino gaming market to display signs of stabilisation between now and year-end.
Several other leaders of the local industry – Sands China Ltd’s president Wilfred Wong Ying Wai in comments to GGRAsia also last week; Lawrence Ho Yau Lung, chairman and chief executive of Macau licensee Melco Resorts and Entertainment Ltd in commentary on his firm’s latest conference call with analysts; and Alvin Chau Cheok Wa, boss of privately-held Macau junket brand Suncity Group speaking at a recent event – have also mentioned they saw signs of stabilisation of demand in the Macau casino market for the fourth quarter.
Sanford Bernstein said on Thursday, referring to ongoing protests in Macau’s neighbouring special administrative region: “While events in Hong Kong have not had a material impact on GGR in our view, recent escalation of activities have had a greater impact than in the third quarter.”
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Proportion of mass-market GGR in the aggregate casino revenue for 2019 in the Macau market