Macau’s casino industry is likely to end 2014 with a year-on-year decline in gross gaming revenue, indicates a note from an investment analyst.
Up to November 30, official numbers from the local regulator, the Gaming Inspection and Coordination Bureau, showed accumulated gross gaming revenue (GGR) for 2014 near standstill, with 0.3 percent year-on-year expansion. It followed heavy declines of 23.2 percent and 19.6 percent in October and November respectively. That was despite a rip roaring 40.3 percent expansion in February GGR and double-digit percentage growth in March and April.
The deterioration that began in June is viewed as politically influenced and related to mainland China’s anti-corruption crackdown, as VIP players stay away.
Unofficial industry returns for the final month of the year – up to December 23 – suggest a monthly decline of 27 percent to 29 percent in GGR, says research from Cameron McKnight of Wells Fargo Securities LLC in New York and his colleagues Rich Cummings and Tiffany Lee.
If confirmed early in January by the gaming bureau, it would tip the Macau market into overall retreat for 2014.
Nonetheless December’s projected performance is slightly better than the 30 percent year-on-year slip Wells Fargo had envisaged, Mr McKnight said on Friday.
“A sequential improvement was unexpected, as most believed President Xi Jinping’s visit would affect high-end visitation,” he and his team wrote, referring to the Chinese leader’s visit to Macau on December 19 and 20 to mark the 15th anniversary of the territory’s return to Chinese administration from that of Portugal.
“Our checks suggest weekly ADR [average daily rate] improved to MOP750 million-MOP780 million, up 7-11 percent from the prior week’s soft MOP698 million result,” added the Wells Fargo team.
The note stated that the brokerage sees “approximately 10 percent” downside risk to estimates for Macau names’ earnings before interest, taxation, depreciation and amortisation (EBITDA) in the first quarter of 2015, “assuming -20 percent market growth”.
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”Month-to-date [in October], we are encouraged that our properties have crossed property-EBITDA break-even levels, led by the recovery in the premium segments”
Chief executive and president of MGM Resorts