Continued weakness in the Macau VIP gambling market has “changed from a ‘supply-side’ (credit) problem into a ‘demand-side’ problem,” said a note issued on Monday by Hong Kong-based analyst Karen Tang of Deutsche Bank AG.
Macau’s casino gross gaming revenue (GGR) for August fell by 6.1 percent year-on-year to MOP28.9 billion (US$3.6 billion), the city’s Gaming Inspection and Coordination Bureau said on Monday – the third month in a row that had happened. It was weighed down mainly by weakness in the VIP sector, which declined by “mid-teens” in year-on-year terms, wrote Ms Tang.
“Junkets noticed that VIP players from Guangdong had come less over the past two months,” she added.
“Players preferred to stay low profile now, especially after the recent anti-graft arrests in Guangdong and Shanxi.”
Ms Tang said a potential pending upside for Hong Kong-listed casino stocks is the Shanghai‑Hong Kong Stock Connect. The pilot progamme, agreed in April between Hong Kong’s Securities and Futures Commission and the mainland’s China Securities Regulatory Commission will enable mutual stock market access between mainland China and the Special Administrative Region. A test of the link was held over the weekend, according to Hong Kong’s Securities and Futures Commission.
In July, Macau casino stocks declined 11 percent on average, and underperformed both the MSCI Hong Kong Index and MSCI China Index by 11 percentage points, said Deutsche Bank.
The MSCI indices are designed to measure the performance of the large- and mid-cap segments of equities markets in their respective jurisdictions.
Ms Tang noted in Monday’s research paper that casino operator SJM Holdings Ltd has “yielded” to labour activists’ demands following a work to rule protest on Saturday.
She wrote: “SJM re-shuffled staff from other casinos to work at Grand Lisboa, so there was no major disruption. However, SJM management still yielded to the union’s demands, and announced an ‘annual subsidy’ of 1.5x to 2.0x monthly salary from 2015 until 2020.”
The bank estimated in a note on July 17 that labour price inflation in Macau casinos was to rise from 5 percent to 8 percent per year in the past to “10 percent to 15 percent per annum in 2014-17”.
Ms Tang added that the bank estimated the market share in August of table games revenue among the six Macau operators was: Sands China Ltd, 25 percent; SJM Holdings, 22 percent; Galaxy Entertainment Group Ltd, 21 percent; Melco Crown Entertainment Ltd, 13 percent; Wynn Macau Ltd, 10 percent; and MGM China Holdings Ltd, 9 percent.
