Macau’s casino industry is not showing signs of being negatively affected by recent regulatory changes related to cash withdrawals at the city’s automated teller machines (ATM), suggests a note from brokerage Union Gaming Securities Asia Ltd. The above-consensus results for casino gross gaming revenue (GGR) in July show “clearly no impact from regulatory changes,” said analyst Grant Govertsen in a Tuesday note.
Casino GGR in Macau rose by 29.2 percent year-on-year in July, to MOP22.96 billion (US$2.85 billion), according to data from the city’s Gaming Inspection and Coordination Bureau, released on Tuesday. The monthly GGR tally was above analysts’ expectations for July.
“With July’s above-consensus GGR in the rearview it appears, as we had expected, that there has been no measurable impact from the installation of KYC [“know your customer”] measures across Macau’s ATMs,” said Mr Govertsen.
The Union Gaming analyst was referring to a recent tightening of cash withdrawal rules for holders of mainland China-issued China UnionPay Co Ltd bank cards. As of July 4, Macau suspended cash withdrawals for holders of such bank cards at those ATMs that do not yet have KYC technology. The city authorities said the use of verification technology was to “promote the integrity of the financial system of Macau”.
In Tuesday’s memo, Mr Govertsen noted: “We continue to believe that these measures were not put in place to stunt the growth of GGR (VIP or mass), but rather view the measures as generic capital control measures designed to slow a widespread issue of non-casino visitors to Macau coming to the market with the express intention of withdrawing Hong Kong dollars out of their renminbi accounts.”
A recent focus for the Macau government has been tighter controls on the large volumes of money flowing through the city, especially via VIP casino gambling. Such play is typically funded by credit issued by government-licensed gaming promoters – commonly referred to as junkets. They also arrange – via agents and sub-agents – collections on player gambling losses.
Japanese brokerage Nomura suggested in a Tuesday note that “a continuation of VIP strength” likely contributed to the better-than-expected results in July.
The brokerage estimated that the split between VIP and mass-market growth in the month of July “was 36 percent and 22 percent year-on-year, respectively”. Nomura noted that the recent VIP strength could eventually lead to government action to control the growth in the high-roller segment.
Casino GGR in Macau’s VIP segment rose by 34.8 percent year-on-year in the second quarter, according to official data.
“Thus far, there has been zero government pushback to much stronger than-expected VIP growth, and any potential policy response likely depends on the extent of the strength in year-on-year growth as well as its sustainability,” said the Nomura team.
“While 15 percent to 20 percent VIP growth in the second quarter of 2017 wasn’t enough to trigger a reaction, 36-percent plus growth in August could be another story,” added the brokerage.
Deutsche Bank Securities Inc said in a Tuesday note it was lifting its GGR estimates for the Macau market in 2017.
“For the third quarter 2017, we are now forecasting GGR growth of [circa] 24 percent … Our fourth quarter 2017 estimate goes to +17.0 percent from +9.1 percent and our full-year 2017 goes to +18.9 percent from +14.7 percent,” said analysts Carlo Santarelli and Danny Valoy.
But they added: “We note that the entirety of our favourable revisions are driven by increases to our VIP forecasts, which assume VIP trends can continue without an exogenous disruption.”
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China