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DB lowers 3Q and 2014 estimates for Macau gaming revenue

Sep 03, 2014 Newsdesk Latest News, Macau, Top of the deck  


DB lowers 3Q and 2014 estimates for Macau gaming revenue

A note from Deutsche Bank AG in New York says the institution is lowering its estimates for Macau gaming revenue in the third quarter and full year 2014.

It follows news on Monday from Macau’s gaming regulator that the city’s casino gross gaming revenue (GGR) for August fell by 6.1 percent year-on-year to MOP28.9 billion (US$3.6 billion). It was the first time in more than five years that monthly casino GGR fell in year-on-year terms for three consecutive months.

“Our overall revenue forecasts for the 3Q14 and 2014 go to -5.6 percent and +2.5 percent, respectively, versus our prior estimates of -0.9 percent and +6.5 percent, respectively,” wrote Deutsche Bank’s Carlo Santarelli in the note issued on Tuesday.

The finance house is now estimating Macau VIP gambling will decline by 16.8 percent year-on-year in the third quarter, while mass wagering will grow by 14.8 percent.

“Our full year 2014 forecast for mass revenue goes to +21.5 percent from +24.3 percent while our VIP revenue forecast goes to -7.3 percent from -2.6 percent,” stated the analyst, adding that the 2015 forecast is for overall revenue growth of 7.2 percent, down from a previous 11.5 percent growth estimate.

The institution says its performance forecasts for individual Macau operators have not been changed at this stage.

A note on Monday from Deutsche Bank’s Hong Kong operation said the structural weakness was in the VIP segment, which had declined by “mid-teens” in year-on-year terms in August, according to analyst Karen Tang – understood to be a reference to percentage decline.

She added there was now a “‘demand-side’ problem” linked to some high rollers being put off Macau casino visits by factors including a crackdown on corruption in mainland China.

But analyst Kenneth Fong of Credit Suisse AG in Hong Kong, on Tuesday said he thought the VIP problem was related with supply of visas to Macau.

He explained: “Based on our discussions with industry participants, the new transit visa restriction has had a more adverse impact than originally expected. This hurt the VIP and, to a certain extent, premium mass market revenue.”

He added that the “timing of recovery is hard to predict and uncertain at this point. Based on historical experience, it may take a few months for players to get used to the rules and revenue to recover.”

Union Gaming Research Macau Ltd’s Grant Govertsen on Monday suggested the largest driver in VIP market weakness as the “PRC [People’s Republic of China] anti-corruption crackdown”. He added that mass market GGR in August exhibited year-on-year growth in the “mid-high teens”.


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