Under currently projected market conditions, Macau could suffer an 8 percent decline year-on-year in casino gross gaming revenue (GGR) in calendar year 2016, said a note issued on Monday by Japanese brokerage Nomura.
If the prediction comes true, it would mean three consecutive years of year-on-year decline in Macau casino GGR, a new and unwanted record since data compilation by the local regulator, the Gaming Inspection and Coordination Bureau, began in its current form in 2005.
“We expect three years of GGR declines – down 3 percent in 2014, 35 percent in 2015 fiscal and 8 percent in 2016 fiscal,” said the note from analysts Richard Huang and Stella Xing in Hong Kong, and Harry Curtis and Kelvin Wong in New York.
They said the revision implied GGR estimates down 5 percent to 17 percent for the 2015 to 2017 fiscal period inclusive; and estimates on earnings before interest, taxation, depreciation and amortisation down by 2 percent to 10 percent for that period.
“Our 2016 fiscal GGR forecast suggests VIP revenues returning to 2008/09 global financial crisis levels with an average monthly GGR of MOP18 billion [US$2.25 billion], just above the Macau government’s indicated warning level,” added the Nomura team. It was referring latterly to public officials’ warnings on the possible need for public spending cuts in Macau if gaming revenue fell below an average of MOP20 billion per month this year. The Macau government gets much of its revenue from direct tax on gaming.
Bloomberg News said on Tuesday – citing the views of 12 analysts it canvassed – that the median estimate for Macau GGR in full-year 2015 is for a 32 percent year-on-year decline.
“They have given up on the idea of a second-half recovery, now assuming a US$14 billion revenue decline in one year,” said the media outlet.
Despite the recent gloom surrounding Macau gaming, Nomura said on Monday it expected sequential improvement in mass-market gaming revenues for most Macau operators in the third quarter this year. The official third quarter numbers are expected from the Macau government in mid-October.
“We estimate five of the six casino operators will enjoy quarter-on-quarter increases in mass revenues in 3Q15F,” said the brokerage.
