Macau’s market-wide casino gross gaming revenue (GGR) is likely to grow by 11.3 percent in year-on-year terms in 2018, says Deutsche Bank Securities Inc.
“Looking ahead to 2018, we are forecasting 11.3 percent GGR growth and EBITDA [earnings before interest, taxation, depreciation and amortisation] growth of approximately 15 percent,” analysts Carlo Santarelli and Danny Valoy wrote in a note issued on Thursday.
Deutsche Bank added it estimated Macau casinos had recorded property-level EBITDA growth of 23 percent in full-year 2017.
The city’s six gaming operators are only expected to begin disclosing their operational results for the fourth quarter and full-year 20017 later this month.
Analysts Mr Santarelli and Mr Valoy said: “We think the bigger variables in 2018/2019 are as follows: the ability for VIP [play] to continue to expand on a sequential basis; the influence of VIP/mass mix on [profit] margins; the timeline/implementation structure of the full smoking ban [inside casinos, to come into effect in January 2019]; and overall policy plans related to currency controls, a hot topic of late.”
The latter was a reference to newly-announced rules from Beijing regarding an annual limit on the aggregate amount of cash people can withdraw from their mainland Chinese bank accounts while in Macau. China’s State Administration of Foreign Exchange announced on Saturday that from January 1 mainland Chinese would be restricted to an annual CNY100,000- (US$15,366-) limit per person for cash withdrawals when using overseas automated teller machines (ATMs). In the past, China’s regulatory definition of “overseas” transactions has included ones performed in Macau.
Prospects for VIP
Commenting specifically on Macau’s VIP sector, Mr Santarelli and Mr Valoy said they estimated “as many as 10 new junket rooms will open in 2018”.
They added: “We expect the growth in licensed junket operators to continue, as we estimate roughly 40 new licensed junkets were established in 2017, despite concerns over regulatory procedures… More importantly, VIP revenue per licensed junket, when adjusted for [tableside smoking area] reclassification activity, remains roughly 32 percent below peak annual productivity… Accordingly, we believe continued junket expansion and greater productivity on a per operator basis provide a solid backdrop for expectations of continued strength within the VIP segment.”
In a separate note issued on Friday covering the Macau VIP sector, brokerage Sanford C. Bernstein Ltd said it currently estimated “high single-digit growth for VIP” in Macau in 2018, “but any surprising strength during the first few months of the year may lead to higher growth.”
Analysts Vitaly Umansky, Zhen Gong and Cathy Huang added: “Our long-term forecast is for VIP to achieve a compounded annual growth rate of around 6 percent through the end of 2022 (2017-2022). However, government policy could create a significant deviation from those figures – either upward or downward.”
The brokerage said it estimated VIP gross revenue recorded a year-on-year growth rate of 29 percent in the fourth quarter of 2017. That had taken full year VIP growth to 26 percent, Sanford Bernstein stated.
The official growth rate of the VIP and mass segments for full-year 2017 will not be made public until later this month, when details of fourth-quarter GGR recorded by segment are due to be announced by Macau’s gaming regulator.
Japanese brokerage Nomura stated in a Tuesday report it thought China’s central government would not be troubled if VIP gambling revenue in Macau grew by as much as 15 percent year-on-year during 2018. “We believe Beijing is agnostic about modest VIP/junket growth (approximately 15 percent) as long as stricter AML [anti-money laundering] and ‘know your customer’ regulations are followed,” stated Nomura.
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"This near-term lull in VIP volume growth [in Macau] could improve if there is a face saving trade agreement between China and Trump, and if China pumps more liquidity into its system to prop up its GDP"
Japanese brokerage Nomura