The drop in Macau’s gross gaming revenue (GGR) for January was in line with expectations, but analysts are now cautioning there is likely to be a record year-on-year drop in February, given a high base in 2014.
Investment analysts say the year-on-year decline in February’s GGR tally might be as much as 40 percent year-on-year this month, with several pointing to softness in the market leading up to the Chinese New Year on February 19. But all the analysts also emphasise that February 2015 presents difficulties when attempting a year-on-year comparison. That’s because Macau’s gaming revenue grew by 40 percent year-on-year in February 2014, a monthly growth record that calendar year.
Macau casino GGR fell by 17.4 percent year-on-year in January to MOP23.75 billion (US$2.97 billion), extending to eight months the losing streak in Macau revenue. That was however an improvement over the 30-percent drop recorded in December.
“Without the traffic control around President Xi’s visit as in mid-December and partly benefited by the more favourable luck, GGR barely improved by 2 percent month-on-month in January, this suggesting the fundamentals remain weak,” said analysts Kenneth Fong and Isis Wong of Credit Suisse AG.
“Looking ahead in February, we estimate the GGR drop to widen to 30 percent to 35 percent year-on-year on normalised luck and higher comparison base (February 13 GGR +40 percent year-on-year),” they said in a note on Monday.
Union Gaming Research Macau Ltd however said the January results suggested that the Macau gaming market has reached “a much-needed point of stabilisation”.
“We note that the total GGR story over the last three months has been stable and in a fairly tight band of MOP23.3 billion to MOP24.3 billion,” said analysts Grant Govertsen and Felicity Chiang.
Union Gaming is expecting GGR of about MOP24 billion this month, a decline of between 35 percent and 40 percent year-on-year.
Historically, Macau’s daily GGR has declined two weeks prior to Chinese New Year, pointed out Japanese finance house Nomura, saying it expects February’s GGR to be down 35.2 percent year-on-year.
“We expect sequentially weaker results starting next week and continuing until Chinese New Year,” said the Nomura research team led by Harry Curtis.
“We also expect substantially weaker Chinese New Year results this year because of the anti-corruption campaign, a cautious UnionPay liquidity environment for premium mass customers, and significantly lower junket credit available to VIP customers,” they added.
In a note on Tuesday, Nomura lowered its 2015 estimates for earnings before interest, taxation, depreciation and amortisation (EBITDA) for five of Macau’s six casino operators, citing lower mass and VIP revenue due to the worsening market environment.
Nomura’s note does not cover Melco Crown Entertainment Ltd. The latter firm last month announced plans to delist from the Hong Kong Stock Exchange. It retains its main listing on Nasdaq in New York.
Meanwhile, Galaxy Entertainment Group Ltd, due to open Phase 2 of its Galaxy Macau casino resort in Cotai in May, started the year as the market leader by GGR, with a share of 22.5 percent in January, according to figures cited by local media. That was up by 1.9 percentage points from the previous month.
SJM Holdings Ltd, the casino operator founded by Stanley Ho Hung Sun, dropped to second place, with a share of 21.9 percent, down from 23.6 percent in December. Sands China Ltd was third, with a market share of 20.4 percent.
Melco Crown was ranked fourth by market share in January, 14.7 percent, followed by Wynn Macau Ltd with 10.4 percent. MGM China Holdings Ltd completed the list, with a market share of 10.1 percent last month, according to local media.
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"People are still pretty reserved in their [gaming] spending. And what the [junket] sector faces now is that the collection of [gaming] debt is difficult"
Kwok Chi Chung
President of the Macau Association of Gaming and Entertainment Promoters