After 20 consecutive months of year-on-year declines in casino gross gaming revenue (GGR), February could be the first month of GGR growth since May 2014, say several investment analysts.
Casino GGR in February 2015 fell sharply year-on-year, declining 48.6 percent to MOP19.54 billion (US$2.44 billion). The Chinese New Year holiday period – which typically sees a spike in gambling in Macau – started on February 19 that year. This year the week-long holiday period starts on February 7.
Typically gaming revenues decline in the weeks leading up to the Chinese New Year holiday period, according to analysts. Based on unofficial industry returns, analysts estimated that average daily revenue fell 15 percent sequentially in the two week period before Chinese New Year in 2015, and declined 8 percent sequentially the year before that.
Casino GGR reached MOP18.7 billion in January, down by 21.4 percent year-on-year, according to official data released on Monday. Monthly GRR was up 1.8 percent sequentially from December.
Union Gaming Securities Asia Ltd said in a note on Monday that February could “quite possibly break” the losing streak.
The brokerage said it expected growth to be supported by: “The typical holiday GGR boost associated with Chinese New Year; that most of the pre-Chinese New Year seasonal slowdown would have already been felt in January; and that February 2016 gets the benefit of one extra day thanks to leap year.”
“Put together, we think that February’s results could look something like October’s MOP20 billion, which would result in 2 percent year-on-year growth,” said analyst Grant Govertsen.
“We don’t think this is a stretch as GGR has exceeded MOP18 billion in each of the last two months despite not having a traditional holiday benefit,” he added.
“That said, we would look for Macau’s GGR story to immediately return to negative year-on-year trends in March and April before finally catching some positive tailwinds heading into summer,” said Mr Govertsen.
CIMB Securities Ltd also expects February to be the first month of positive year-on-year GGR growth since May 2014.
“We forecast February GGR of MOP20.5 billion (+5 percent year-on-year, +10 percent month-on-month), the first positive year-on-year growth after 20 consecutive months of declines,” said CIMB analysts Michael Ting and Jensen Poon in a note on Monday.
The CIMB team also has a positive outlook for the number of visitors during the week-long period this month.
“The general expectation is for this year’s visitation to be maintained at least at a similar level as last year with stronger visitation weighted towards the first half of the holiday period,” said Mr Ting and Mr Poon.
The head of Macao Government Tourism Office last week forecast that the number of tourists visiting Macau during the upcoming Chinese New Year holiday period would show a 1 percent rise compared to a year earlier. During 2015’s week-long holiday period for Chinese New Year, Macau registered almost 1.03 million visitor arrivals (including inward travel by imported workers and non-local students).
The CIMB analysts said: “From our channel checks, we did not hear of any discounting for hotels or tour packages for the upcoming holidays with room rates at least twice as much as during off-season periods, which indicate good demand.”
But not all analysts expect February to show a year-on-year growth in casino GGR.
Deutsche Bank Securities Inc says that given the timing of Chinese New Year this year, the most easily comparable periods to examine for sequential analysis are those of 2010 and 2013, two years in which the holiday period “fell within reasonable proximity” to this year’s dates.
“In those years, win per day was up, on average, 9 percent from January. Assuming a similar sequential improvement in GGR per day in February, and contemplating the extra day in the calendar for the month, we estimate February would fall [circa] 2 percent year-on-year (+2 percent sequential),” said analysts Carlo Santarelli and Danny Valoy.
They added: “While encouraging, given the down 20 percent to 40 percent year-on-year comparisons the market has become accustomed to, it should be noted that a -2 percent year-on-year comparison in February still represents a two-year stack comparison of down [about] 50 percent, compared to the -35 percent in January.”
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Spending on purchase of goods, commissions paid and customer rebates in Macau's gaming industry in 2018