Brokerage Wells Fargo Securities LLC says that, after meetings in Las Vegas with senior executives from casino firms with Macau operations, it has found uncertainty about Macau persists and is weighing on the industry.
“Macau operators pointed to significant near-term uncertainty related to a host of issues (e.g. table allocations, the political environment, foreign currency impact),” senior analyst Cameron McKnight said in a note on Wednesday.
Wells Fargo held several meetings for investors this week in Las Vegas, including with senior management from Las Vegas Sands Corp, MGM Resorts International and Wynn Resorts Ltd, parent companies of Macau-based Sands China Ltd, MGM China Holdings Ltd and Wynn Macau Ltd, respectively.
“We came away increasingly convinced there will be no V-shaped recovery in Macau,” Mr McKnight said.
“A few operators even suggested that VIP play in Macau may never fully come back, citing a junket liquidity crunch and tighter policy toward Macau from the mainland [China government],” he noted.
Mr McKnight added: “Mass trends are ‘stable’ but are down versus prior expectations of modest growth, and visibility into 2016 appears to be limited.”
Macau has experienced 15 consecutive months of decline in casino gross gaming revenue (GGR) judged year-on-year. Casino GGR for the first eight months of the year was tracking at an aggregate 36.5 percent fall from the equivalent period in 2014.
Analyst Karen Tang of Deutsche Bank AG said in a note on Tuesday that the investment community needs to “massively cut” its estimates on what level of recovery can be achieved in the Macau casino market in 2016. The bank forecast a 7 percent year-on-year decline in casino GGR in 2016.
Investment analysts have noted that the deterioration in Macau’s VIP volume trends persisted in August.
“The last eight days of August showed a nice acceleration in GGR after a slower start to the month, some of which can be attributable to strong VIP hold. However, the higher hold also likely pressured rolling volumes in the month, which were down 54 percent, steeper than the 51 percent decline in July,” Union Gaming Research LLC analysts Christopher Jones and John DeCree said in a note on Thursday. “The above-normal hold pared VIP revenue declines to 40.4 percent,” they added.
“Total mass market gaming win declined 30.3 percent year-on-year in August. The year-on-year decline is squarely in line with the trailing three-month average decline, though on a sequential basis, total mass-market win increased 3.1 percent from July,” said the Union Gaming team.
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”As the Macau gaming revenue structure is now leaning heavily towards the mass business … once the border fully reopens, the recovery from mass should drive the sector to bounce more swiftly”
Vitaly Umansky, Louis Li and Shirley Yang
Analysts at Sanford C. Bernstein