Fitch Ratings Inc has cut its full-2014 growth forecast for Macau’s casino gross gaming revenue (GGR) to 4 percent. Continued weakness in the VIP segment led to the downward revision.
“We are revising the forecast down from 10 percent, which was already reduced in mid-July from our initial forecast of 12 percent, but we note that long-term fundamentals remain strong,” the ratings agency said on Thursday.
It added: “The VIP segment has been pressured recently by tightening of junket credit and the corruption crackdown on the mainland. We think these pressures are temporary and expect VIP to turn back positive in early 2015 as year-on-year comparisons get easier and as the mentioned pressures subside, although the exact timing is hard to handicap.”
The new forecast for full-2014 “incorporates the balance of the year’s growth for mass, VIP and slots of +15 percent, -15 percent and +5 percent, respectively.”
Fitch’s latest estimate equates to 3.5 percent average monthly declines for the remainder of the year.
“Our assumptions take into account the smoking ban on the mass floors going into effect next month, lack of new supply and tough 2013 comparisons for the balance of the year (mass and VIP were up 44 percent and 18 percent, respectively, in the fourth quarter last year),” Fitch stated.
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 last week.
It was the first time in more than five years that monthly casino GGR fell in year-on-year terms for three consecutive months. It dropped by 3.7 percent in June, followed by a 3.6 percent decrease in July.
But GGR for the first eight months of 2014 is still up by 8.1 percent compared to the same period last year.
Japanese finance house Nomura said earlier this week it expects GGR to fall by 6 percent to 10 percent year-on-year in September if business in the first week of the month is any guide. The brokerage added that current trends suggest full-2014 revenue growth market wide to be only 2 percent to 3 percent, versus an analyst consensus of 3 percent to 6 percent.
A number of investment banks have recently reduced their revenue growth estimates for 2014 as a whole, based on the continuing VIP weakness. Last week, Deutsche Bank in New York also reduced share price targets for Wynn Resorts Ltd (parent of Macau operator Wynn Macau Ltd), Las Vegas Sands Corp (parent of Sands China Ltd) and MGM Resorts International (majority owner of MGM China Holdings Ltd).
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China