Get ready for an L-shaped recovery of gross gaming revenue (GGR) in Macau, warns brokerage Wells Fargo Securities LLC.
“We’re seeing more evidence supporting a flat versus V-shaped recovery,” Wells Fargo analysts Cameron McKnight, Rich Cummings and Tiffany Lee wrote in a note issued on Thursday.
They added: “We remain neutral on Macau gaming, and continue to believe stocks will remain range-bound this year as Macau adjusts to the ‘new normal’ of greater government intervention and lower, steadier longer term growth.
“When the macro and policy settings stabilise, we don’t expect a ‘V-shaped’ recovery in Macau revenues as we saw in 2009 and 2013.”
GGR in Macau fell 39.4 percent year-on-year in March to approximately MOP21.49 billion (US$2.69 billion), the city’s Gaming Inspection and Coordination Bureau said on Wednesday.
March was the tenth consecutive month of declines in GGR judged against year prior periods and the second-worst monthly decline on record after the February drop.
The Wells Fargo analysts expect GGR to drop by around 33 percent year-on-year in April and May. They remain cautious about the city’s short-term prospects citing lower volumes in VIP play, with high rollers keeping a low profile amid mainland China’s anti-graft drive.
“Macau average daily revenues have tapered off since January, which aligns with our view that the recovery in Macau will not be ‘V- shaped’,” they stated.
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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