Macau casinos’ better-than-consensus performance in September was probably due in part to year-on-year expansion of the VIP portion of casino gross gaming revenue (GGR), said several brokerages.
A Sunday note from analysts DS Kim and Daisy Lu of JP Morgan Securities (Asia Pacific) Ltd – quoting unofficial industry data – said September marked the first time in 29 months that Macau had posted a year-on-year expansion of VIP revenue.
Mass-market and VIP casino GGR combined rose 7.4 percent year-on-year in September, to MOP18.40 billion (US$2.30 billion). So said on Saturday the local regulator, the Gaming Inspection and Coordination Bureau, also known by its Portuguese acronym DICJ.
The official third-quarter split between VIP gambling revenue and the mass-market variety will be published by the gaming bureau later this month.
“We view the surprise as coming from the VIP segment, which we estimate to have risen circa +5 percent year-on-year (versus year-on-year declines of circa 10 percent in July and August…) [making September VIP] the first positive growth in 29 months,” the JP Morgan analysts wrote.
But they added: “The key question would be whether (or how long) this VIP momentum is sustainable.”
Mr Kim and Ms Lu noted that August’s VIP performance – when the overall GGR number, including mass-market play, grew by 1.1 percent year-on-year, the first such rally in 27 months – had probably been supported by the opening of Wynn Palace, the new Cotai resort from Wynn Macau Ltd, on August 22. September VIP GGR had probably been positively affected by the launch of the Parisian Macao, a resort from Sands China Ltd, which opened on September 13, added the JP Morgan team.
September benefited from “higher than normal VIP hold rate and stronger than expected VIP volumes,” resulting in potentially a flat or slightly positive year-on-year growth in Macau VIP GGR,” said a Monday note from Sanford C. Bernstein Ltd.
“Mass was likely up in low- to mid- double digits (11 percent to 14 percent range),” said analysts Vitaly Umansky, Zhen Gong and Yang Xie.
“The DICJ will release third quarter breakdown of GGR in mid-October (while this data is flawed due to lack of reclassification of certain VIP play to premium mass, it will give better sense of the GGR split in the third quarter),” added the brokerage.
Union Gaming Securities Asia Ltd said in a Saturday note that market wide, daily casino GGR for September was MOP613 million, “the highest non-holiday GGR per day for about one-and-a-half years”.
Analyst Grant Govertsen also stated: “While room rate surveys have shown that rates across all of Macau and Cotai are down year-on-year and remain at bargain levels, we believe this is okay and don’t view this as a leading indicator of ‘soft’ gaming trends. We think the discounted room story is actually driving incremental customers to the market – another advantage for Sands China given its dominant amount of room inventory.”
A note on Sunday from Deutsche Bank Securities Inc said that Macau’s October casino GGR might expand by 8.5 percent year-on-year. It based this view on the month-on-month improvement seen in casino ‘win’ – a measure of the amount wagered, less prizes paid – from September to October in the previous four years.
But the note from Carlo Santarelli and Danny Valoy cautioned: “While the [September] results are stronger than expected from a sequential and supply-adjusted framework, we believe the honeymoon periods of both Parisian and Wynn Palace played a role and hence, we believe the fourth-quarter results will be more telling.”
For the nine months to September 30, Macau’s aggregate casino GGR was MOP162.79 billion, a shrinkage of 7.5 percent from the prior-year period, according to the official data released on Saturday.
Lionel Leong Vai Tac, Macau’s Secretary for Economy and Finance, said – at a government reception on Saturday to mark China’s National Day – the administration was confident that casino gross gaming revenue in 2016 would reach the government’s MOP200-billion target.
He said factors favouring the likelihood of such an outcome included: the positive performance in gaming revenue in September, a month that is commonly considered an off-peak period for inbound tourism to Macau; and the seasonal peak in tourism expected in October.
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Macau’s January casino gross gaming revenue