Macau’s casino gross gaming revenue (GGR) for March is likely to grow year-on-year by between 9 percent and 15 percent, according to a selection of investment analysts.
The estimates are based on unofficial industry returns. In January and February, the difference between unofficial casino GGR growth estimates quoted by the investment community and the respective official monthly tallies issued by the government was wider than had been generally recorded in the months of 2016.
Christopher Jones of the Buckingham Research Group Inc, said in a Monday note that according to his firm’s industry checks, average daily revenues for Macau table games in the seven days to March 12 were HKD575 million (US$74.0 million), for an estimated full month tally of HKD18.6 billion to HKD18.9 billion.
“The midpoint of this suggests year-on-year growth is running at approximately 7 percent, slightly below our March projections. Being as it’s still early in the month, we are sticking with our projection [of year-on-year growth in the range of 10 percent to 12 percent] for now,” stated Mr Jones.
Brokerage Sanford C. Bernstein Ltd estimated in a Monday note an average daily rate for casino GGR of MOP615 million (US$76.9 million) to MOP635 million for the remainder of the month, indicating total March casino GGR in the range of MOP19.6 billion and MOP20 billion, or an increase of 9 percent to 11 percent year-on-year.
Most bullish on March was brokerage JP Morgan Securities (Asia Pacific) Ltd. Analysts DS Kim and Sean Zhuang said in a Monday note that Macau’s March casino GGR had shown “healthy trends so far”.
“We maintain our March GGR forecast at +10 percent to +15 percent year-on-year versus +11 percent during February, implying a MOP640 million to MOP670 million per day run rate (which would be the highest non-holiday print since early 2015).”
They added: “This would make first-quarter GGR grow 11 percent to 12 percent year-on-year and 3 percent to 4 percent quarter-on-quarter, to the highest level in eight quarters: the sector’s sequential profit expansion story remains intact, in our view.”
Private credit
Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Yang Xie reiterated an earlier warning from the brokerage that total social financing (TSF) in China – that analysts say is typically a proxy, on an up to six-month trailing basis, for the performance of the Macau VIP gambling segment – was likely to be further moderated by the Chinese government during 2017, amid official concerns about the economy overheating. This could lead to some headwinds for VIP and some premium mass play in the Macau market in the second half of the year, suggested the brokerage.
Total social financing in the Chinese context is an economic barometer established by China’s central government. It sums up total fundraising by Chinese non-state entities, including individuals and non-financial corporate organisations.
Ease of availability of credit in China can influence the degree to which there is liquidity in parts of the country’s property market, suggest analysts. VIP gamblers can use property sales to pay off gambling losses or can offer property as security for gambling credit.
“On March 9, the PBOC [People’s Bank of China] announced TSF… in February which came in at RMB1.15 trillion [US$166.27 billion], down by 69 percent month-on-month but up by 38 percent year-on-year; 20 percent below the market consensus of RMB1.45 trillion,” noted Sanford Bernstein.
The brokerage added: “The sharp decrease was mainly driven by sharp deceleration in new local currency loan underwriting of RMB1.03 trillion (versus net increase of RMB2.31 trillion in January). This sharp reduction is largely due to PBOC’s window guidance to keep first-quarter credit extension [at] similar pace [to] last year.”
Sanford Bernstein stated: “We expect that slowing-down of TSF growth (along with other credit and liquidity metrics) will create some headwinds to the VIP segment (and to some extent the higher-end portion of premium mass players) in the second half this year.”
