Galaxy Entertainment Group Ltd lost market share in gross gaming revenue (GGR) in May according to industry figures compiled by GGRAsia. Galaxy Entertainment slipped 1.6 percentage points month-on-month to 18.5 percent, putting it in third place among the six local operators.
Investors were looking on Monday – the day that Macau released its official May GGR tally – for any hint that the crowds at the opening of Galaxy Macau Phase 2 and Broadway at Galaxy Macau on May 27 (pictured) had been accretive to earnings for Galaxy Entertainment. That is despite the fact the two facilities contributed fewer than five days to the May numbers.
Market wide, Macau GGR fell 37.1 percent year-on-year in May to approximately MOP20.35 billion (US$2.55 billion). It was the 12th month in succession for such market wide decline, confirmed data released on Monday from the local regulator, the Gaming Inspection and Coordination Bureau.
The Macau leader by GGR share in May according to industry figures was Sands China Ltd with 26.5 percent, up by 2.3 percentage points month-on-month.
SJM Holdings Ltd, founded by gaming tycoon Stanley Ho Hung Sun, was in second place in the Macau market with 21.8 percent. Melco Crown Entertainment Ltd was in fourth with 14.3 percent, compared to 9.9 percent from Wynn Macau Ltd. MGM China Holdings Ltd had 9 percent of GGR in May.
There is no official public information so far on hold rates during May for live dealer baccarat among the six Macau operators. Hold rates can have an influence on market shares of GGR.
Karen Tang of Deutsche Bank AG said in a report on Monday that the opening of Galaxy Macau Phase 2 and Broadway Macau “failed to create much demand”.
“We had expected five to six junkets would open rooms considering Galaxy’s strong junket network,” said Ms Tang.
“Over the weekend, we spoke to junket agents again to check on feedbacks. These junket agents said their VIP customers were not particularly excited about the new casinos in Macau. Instead, VIP players were keen to explore overseas destinations (Manila, Vietnam, Cambodia and Australia). While Galaxy’s new non-gaming offerings will attract more visitors, we worry that the weak Macau fundamentals will slow the casino’s ramp up,” stated Ms Tang.
“…consensus expects Macau’s GGR to recover to MOP720 million per day after Galaxy opening. As Macau didn’t even achieve this during the opening week [of Phase 2 and Broadway] the market will likely question the consensus view of ‘supply driving demand’,” wrote Ms Tang, quoting unofficial industry returns for average daily revenue.
She added that last week’s daily GGR market wide had been MOP691 million per day; only 6 percent above the April to May daily run rate.
De-rating risk
Kenneth Fong and Isis Wong of Credit Suisse AG said in a note on Monday that “all eyes” would be on the performance of Galaxy Macau Phase 2 in the coming weeks.
“The [Macau] revenue over the next few weeks will be closely monitored by the market to gauge the incremental demand created and market share shift post this new project opening. If Galaxy Macau Phase 2 disappoints the market, a sector de-rating will likely be triggered as the hope for ‘supply drives demand’ will turn quickly into concern over ‘industry oversupply’,” wrote the Credit Suisse team.
Union Gaming Research Macau Ltd stressed that with fewer than five days of operation during May for Galaxy Macau Phase 2 and Broadway Macau it was too early to know what impact the openings – involving a combined investment of HKD20.1 billion (US$2.6 billion) – would have on the casino firm’s market performance.
“Since opening last Wednesday, we have observed the Galaxy complex to be notably busier than recent history would suggest, likely leading to an uptick in GGR for Galaxy – although not necessarily for the market,” said Union Gaming’s Grant Govertsen and Felicity Chiang.
“Based on the currently depressed market dynamics, we continue to believe that the new Galaxy supply will be more of a share taker than a market grower, although it will take many weeks/months to determine the exact dynamics,” they added.
Anthony Wong and Angus Chan of UBS Securities Asia Ltd said in their Monday note: “We believe the initial excitement of a new opening has drawn additional crowds and trips from gamblers over the last few days, however it is far too early to assess the impact of Galaxy’s openings based on a few days of volume.”
They added that market wide, daily GGR would need to recover to MOP820 million per day – a rise of 26 percent on current levels – if market consensus performance for 2015 of a 20 percent decline in Macau GGR was to be achieved, “which is optimistic in our view”.
