GGRAsia – DB reduces 2014 Macau estimates as VIP lags

DB reduces 2014 Macau estimates as VIP lags

Jul 07, 2014 Newsdesk Latest News, Macau, Top of the deck

Macau casino revenue is likely to return to modest year-on-year growth of 1.2 percent in July, says Deutsche Bank analyst Carlo Santarelli.

In June the territory’s gaming revenue growth declined 3.7 percent year-on-year. It was the first such drop in five years according to GGRAsia estimates.

Mr Santarelli expects Macau’s VIP revenue growth to shrink judged year-on-year during the third quarter and for the year as a whole, helping to create a drag effect on overall revenue expectations for 2014.

As a result, the bank is reducing its third quarter and full-year estimates for Macau.

But the institution is bullish about the prospects for the mass segment, which it thinks can grow by 28 percent year-on-year in 2014. Credit Suisse said recently it thought mass revenue would expand by 34 percent this year.

Revenue from VIP baccarat – the game of choice for Macau high rollers – was approximately MOP65.06 billion (US$8.15 billion) in the first quarter of 2014, or 64 percent of all revenue from casino games of fortune for the period, according to data from the Gaming Inspection and Coordination Bureau. It was a year-on-year expansion from the first quarter 2013 of 12.5 percent.

Since then however, the VIP market appears to have cooled, with analysts identifying a squeeze on mainland credit and greater scrutiny by the mainland authorities of high rollers as possible reasons. The official numbers on mass and VIP revenue for the second quarter will be published by the gaming bureau later this month.

Nonetheless, New York-based Mr Santarelli says in a note that he expects the mass market to help third-quarter gross gaming revenue (GGR) in the territory expand by 4.9 percent year-on-year and 2014 gains as a whole to be 9.1 percent.

“Our overall revenue forecasts for the 3Q14 and 2014 go to +4.9 percent and +9.1 percent, respectively, versus our prior estimates of +11.2 percent and +12.3 percent, respectively,” wrote Mr Santarelli.

“We are now estimating 3Q14 VIP and mass revenue comparisons of -5.7 percent and +24.3 percent, respectively, versus our prior estimates of +2.0 percent and +28.2 percent, respectively,” states the analyst.

He adds: “Our full year 2014 forecast for mass revenue goes to +28.2 percent from +29.4 percent while our VIP revenue forecast goes to -0.7 percent from +3.5 percent. Our 2015 growth forecast is +11.6 percent, down from +12.8 percent.”