Four brokerages are anticipating Macau’s April casino gross gaming revenue (GGR) will decline year-on-year at a rate of between 2 percent and 8 percent.
They cite as a factor in the likely retreat, ongoing difficult comparison with the numbers from a year earlier. That is on the basis that Macau GGR growth was robust in early 2018, being hurt from the second half of 2018 onward, due to United States-China trade tensions.
Several institutions express optimism that China’s underlying economy could be strengthening, which they say might have a positive effect on Macau GGR later in the year.
There has been some analyst commentary recently – based in part on conversations with casino managements – that demand for VIP play had been softening in the first quarter of the year, and that this had contributed to the slight retreat on Macau GGR in the first three months of 2019 compared to a year earlier.
The official split between the mass market and high roller play is only issued on a quarterly basis by the Macau government, and typically some days after the end of the reporting quarter.
The March GGR numbers issued on Monday by the city’s casino regulator, the Gaming Inspection and Coordination Bureau, showed GGR down 0.4 percent year-on-year. The latest monthly result put the market’s accumulated 2019 year-on-year decline at 0.5 percent, at MOP76.15 billion (US$9.46 billion). January casino GGR registered the first year-on-year monthly decline since 2016.
“As comps [comparisons] begin to ease this spring we are looking for growth to return as of May and generally maintain in the mid-single digits,” said a Monday note from analyst Grant Govertsen of Union Gaming Securities Asia Ltd.
The brokerage is currently forecasting April GGR of MOP25 billion, down 2.8-percent from the prior-year period.
Japanese brokerage Nomura said in a Monday memo it was expecting a 3 percent to 8 percent decline in April, “against a tough comp”.
JP Morgan Securities (Asia Pacific) Ltd anticipated April GGR to decline by 5 percent to 7 percent, a forecast unchanged from its previous estimate, but said that might be followed by a “low-single-digit recovery” in May. Carlo Santarelli and Steven Pizzella of Deutsche Bank Securities Inc said in their memo after the March GGR numbers that April forecasts would be a “challenge, ahead of easing comps” due later in the year.
Sanford C. Bernstein Ltd stated in a Monday note it was forecasting April GGR at -4 percent to -2 percent year-on-year, “on tough year-on-year comparison”.
The institution’s analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu observed that China economic data for March indicated “signs of turnaround” but added it was “unclear how sustainable” that would be in coming months.
It has also been stated by a number of analysts that the link between China’s economic performance and Macau GGR performance is not always clear-cut.
Nonetheless it was reported on Monday – with news outlets citing a private survey for the Caixin/Markit Manufacturing Purchasing Managers’ Index – that manufacturing activity in China expanded unexpectedly in March at its fastest pace in eight months.
The index recorded a reading of 50.8 for March, versus market consensus expectation – based on a Reuters survey – of a 49.9 reading. A number below 50 signals contraction, while a reading above that level indicates expansion.
Union Gaming’s Mr Govertsen observed in his note that the absolute level of Macau GGR in March – at MOP25.84 billion had been higher than February’s MOP25.37 billion.
“In our view, considering the macro backdrop, a sequential increase should be viewed positively and a sign of resilience in the market,” added the analyst.
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"The Hong Kong protests may hurt Macau gross gaming revenue by about mid-single-digit (i.e., half of maximum visitation exposure), which should fade away gradually as people will find alternative ways to visit Macau”
DS Kim, Jeremy An and Christine Wang
Analysts at brokerage JP Morgan Securities (Asia Pacific) Ltd