Brokerage JP Morgan Securities (Asia Pacific) Ltd says it sees “telltale signs of sustainable upcycle” in the Macau gaming market, following a strong first quarter performance.
“All seems well and virtually everyone is feeling positive, across segments and across operators, i.e., mass demand is growing to record highs; VIP stays strong, with ample-as-ever junket liquidity; cost environment is still benign, as is the competitive environment,” wrote analysts DS Kim and Sean Zhuang in a Monday note. The memo followed a recent visit to Macau.
The Macau market’s accumulated first-quarter casino gross gaming revenue (GGR) stood at MOP76.51 billion (US$9.46 billion), up 20.5 percent from the prior-year period, according to official data. Macau casino GGR from VIP rose 21.0 percent year-on-year in the first quarter, slightly faster than the 19.9 percent recorded in the mass segment, showed data issued on Monday by the city’s gaming regulator.
The JP Morgan team said the Macau gaming market recovery “seems to be highly broad-based, encompassing all segments such as junkets (both big and small), premium/mid-tier mass, and grind mass”.
“The fact that this [recovery] is occurring without any discernible rise in promotion suggests it’s a genuine demand recovery, not artificially pulled forward,” noted JP Morgan’s Mr Kim and Mr Zhuang.
The analysts said they had heard that player numbers and average spending in the Macau market “are both rising”. “This signals that the addressable pool of patrons itself has grown,” enabling operators to increase the yield on their business, they added.
JP Morgan forecast Macau gaming industry earnings before interest, taxation, depreciation and amortisation (EBITDA) “to jump +23 percent year-on-year in first quarter (+28 percent if luck-adjusted), and momentum should continue well into the rest the year with +20 percent growth in EBITDA”.
Daily casino GGR in Macau is also showing robust growth in April, suggested analysts at Japanese brokerage Nomura.
“We estimate GGR/day was around MOP855 million to MOP860 million last week, up around 19 percent year-on-year (+21 percent month-to-date),” said the brokerage in a Monday memo.
“By segment, we estimate that 1) a combination of higher hold percentage and volume strength resulted in higher average daily VIP revenues versus the prior week and 2) mass GGR/day is tracking up circa 3 percent sequentially versus the average in March,” wrote analysts Harry Curtis, Daniel Adam and Brian Dobson.
They added: “Assuming the GGR decline in April versus March is in line with the trailing six-year median, or down about 8 percent month-on-month, we estimate Macau gaming revenues in April will be circa MOP23.9 billion. Our GGR estimate for the month implies year-on-year growth of 18 percent.”
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings