A brokerage said it was not “optimistic” regarding the business outlook for Macau casinos during the so-called autumn “Golden Week”, a Chinese holiday season including the country’s National Day, which falls on October 1.
“While hotel bookings [in Macau] are solid, we expect the quality of the customers will be lower (i.e., lower spend per head) this year,” said the Monday memo from Sanford C. Bernstein Ltd.
Casino managements’ spending on customer incentives such as complimentary hotel rooms “will be high during the period, but likely go to an average lower-spend customer (lower average daily theoretical loss) than in 2018,” wrote analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.
“Consequently, higher-end play will likely remain tepid during Golden Week and during the whole of October,” they added.
An official of Macau’s tourism body was quoted on Monday as saying the city anticipated a possible 15 percent year-on-year rise in visitor numbers during Golden Week. Investment analysts have noted though that headline visitor statistics do not necessarily translate into good numbers for casino gross gaming revenue (GGR) as a modest pool of high-value players – even in the mass segment – are said to be providing a disproportionate amount of the industry’s revenue.
JP Morgan Securities (Asia Pacific) Ltd said in its Monday note that “all eyes” would be on October Golden Week trends in the Macau casino gambling industry. “We’ll get some colour around October 7 to 8,” stated the institution’s analysts DS Kim, Jeremy An and Derek Choi.
But JP Morgan noted that so far this month, even the mass segment – generally seen as less volatile than the VIP one – was showing signs of flagging.
“Mass demand seems somewhat disappointing, similar to what we felt in August,” said the institution, citing its own research.
“We estimate mass GGR has edged down by mid- to high-single-digit [in percent] month-on-month for the month to date, although year-on-year growth appears strong at mid-teens (thanks to easy comparisons from Super Typhoon [Mangkhut] last year),” wrote the JP Morgan team.
“Granted, it is difficult to analyse the trend given holiday seasonality and ongoing impact from social unrest in Hong Kong; this remains the key area to monitor as mass demand drives 85 percent-plus of industry profits,” they added.
VIP: signs of stabilisation
The JP Morgan team further noted that VIP gambling demand showed “some signs of stabilisation,” with major junkets’ volumes tracking “flattish” month-on-month, and slowing the pace of year-on-year declines, so that they were “down 15 percent to 20 percent year-on-year, from about 30 percent drops in August; albeit from a (very) low base”.
The organisation kept to its previous September GGR forecast, for 1 percent to 2 percent growth year-on-year, implying a MOP720 million (US$89.2 million) to US$750 million per day run rate for the rest of the month.
Sanford Bernstein said it was reducing its estimate for September GGR performance to between 1 percent contraction and 1 percent growth year-on-year.
The Sanford Bernstein team said that aside from ongoing weakness in China’s currency, the yuan, there was also “negativity surrounding Suncity,” a reference to Macau’s largest junket brand and the allegations in mainland China media that it had facilitated “online gambling” outside the Macau market – a claim denied by the brand.
Sanford Bernstein said that nonetheless the controversy “continues to pressure junket VIP as some agents withdraw some funds and some VIP players delay visiting Macau…”
There was also “overall uncertainty surrounding the geopolitical (i.e., U.S.-China trade tensions) and macro[economic] situation,” that had continued to “impact GGR,” said the institution.
Brokerage Nomura said in its Monday note on Macau that it expected “roughly 2 percent to 3 percent GGR growth” in September.
That would imply “more than 1,000 basis points of sequential acceleration versus last month’s decline, given much easier one-year growth comparisons for the balance of the year,” wrote analysts Harry Curtis, Daniel Adam and Brian Dobson.
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”We believe the positive stance from China towards Macau would help market sentiment in the near term despite limited short term benefit to the [casino] gross gaming revenue”
Kenneth Fong, Lok Kan Chan and Rebecca Law
Analysts at Credit Suisse