Guidance from some Macau junket operators indicates VIP gambling volume in January for that market was down 25 percent year-on-year, according to a Tuesday note from Credit Suisse AG.
For the Macau market as a whole, January casino gross gaming revenue (GGR) – a different measure of industry performance – registered the first year-on-year monthly decline since 2016.
“The feedback from the Macau top junkets is that volume has been choppy,” said the memo from analysts Kenneth Fong and Lok Kan Chan, in an update on Macau gaming performance covering the calendar and lunar new year periods.
“January VIP volume saw a 25 percent year-on-year decline but GGR was benefited by a good VIP luck of an estimated 3.4 percent,” the Credit Suisse analysts added, referring to economic benefit for the house.
The memo did not mention whether junkets considered the ending – from January 1 – of tableside smoking in VIP areas as a factor in the performance that month of the Macau high roller segment. Tableside smoking is still permitted in a number of other Asian casino markets, including Singapore.
Regarding the segmental performance for January mentioned in the Credit Suisse note, the Macau government does not issue public data on the city’s rolling chip volume, but rather on GGR. The city authorities do report on segment performance of VIP versus mass-market game categories, but only on a quarterly basis and typically several weeks after the end of the relevant quarter.
Credit Suisse added that Chinese New Year GGR – encompassing a holiday period that typically sees a bounce in gambling volumes – had “slightly disappointed” observers.
Referring again to guidance from “top junkets” the institution said: “Volume for the peak days (from the third day of Chinese New Year, or 7 February) is roughly similar to what they saw during last year’s October Golden Week.”
The latter was a reference to another Chinese holiday period associated with strong Macau gambling demand.
Credit Suisse further noted regarding Chinese New Year this time, which officially ran from February 4 to February 10 as calculated from the lunar calendar: “On a like-for-like basis (using the Chinese calendar count), [junket investor] Suncity Group saw their rolling volume down marginally, 5 percent year-on-year.”
VIP spending ok
The bank’s analysts added that the overall spending power of VIPs had “not seen much change so far, despite the volatility” in VIP gambling volumes.
“Near term, we believe the sector would bear the brunt of the tug-of-war between a weaker China macro and strong bottom-up fundamentals (healthy junket system, better infrastructure and enhanced player analytics driving mass segment),” wrote the Credit Suisse team.
“While the tough year-on-year comparison and VIP volatility may cap sector upside, the solid mass and potentially stabilising VIP (on the back of China liquidity relaxation) should drive a better GGR performance in the second quarter,” they added.
For the month of February, Credit Suisse forecasts that Macau casino GGR will be MOP24.4 billion (US$3.02 million), or about the same as a year ago. By that reckoning – when combining last month and this month’s results – calendar-year 2019 GGR would be about 2 percent to 3 percent lower compared to the same period last year, said the institution.
The bank also gave some commentary on the 27 percent spike in visitor arrivals for Chinese New Year compared to the festive period last year, and what – if anything – it meant for the city’s casino industry.
“Visitors travelling through the Hong Kong-Zhuhai-Macau Bridge accounted for 16 percent of the total visitation, this alone contributing a 20 percent year-on-year growth. Among the visitors, we believe that a lot of them could be first-time visitors or non-gamblers, as the new infrastructure has improved accessibility,” said Credit Suisse.
The bridge, which opened in October, links Macau with Hong Kong, on the other side of the Pearl River estuary.
The note said regarding bridge-users visiting Macau: “Despite not generating immediate gaming revenue, this should pave the way for longer-term growth as casinos gradually convert them into valuable players. From our discussion with industry participants, we estimate that mass is up roughly 10 percent year on year.”
In mid January, brokerage Sanford C. Bernstein Ltd forecast that VIP revenue might shrink by 2 percent this year. The Nomura banking group said in early January it was expecting “7.5 percent VIP compression in the first half of 2019,” and “low single-digit” growth in the second half.
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Spending on purchase of goods, commissions paid and customer rebates in Macau's gaming industry in 2018