The temporary closure of Hong Kong International Airport on August 12 and 13 in relation to protests that have been affecting that city, did not hurt gross gaming revenue (GGR) in Macau for the seven-day period from August 12 to August 18. So said two brokerages in separate notes issued on Monday.
“We estimate daily GGR last week was around MOP871million [US$107.8 million] (MOP822 million per day month-to-date), up approximately 7 percent sequentially from our estimate for the prior week (MOP814million/day),” said Instinet LLC, a research arm of Japanese brokerage Nomura.
Analysts Harry Curtis, Daniel Adam and Brian Dobson added: “Protests in Hong Kong and the temporary closing of the airport had no effect on the weekly GGR number, it seems.”
Nomura had stated in a note last week it expected the temporary closure of Hong Kong’s airport to have only a short-term impact on Macau’s casino sector.
Hong Kong’s airport authority decided to close temporarily the city’s air hub on August 12, due to disruption to operations caused by anti-government protests. The decision came after thousands of protesters occupied the facility’’s arrivals and departures halls.
In the Macau casino market, tourists form the majority of gamblers, according to a number of research studies. A portion of Macau visitors use Hong Kong’s airport – one of the world’s busiest air hubs – to get to Macau. Travel between the two places has been made easier by the opening in October of the Hong Kong-Zhuhai-Macau Bridge, which on the Hong Kong side makes landfall near the airport.
Investment analysts however have noted in previous commentary on Macau that there need not be a direct correlation between numbers of tourists to Macau and gaming spend in casinos. This is because research indicates that high-stakes play by a relatively small number of visitors is still an important component of the market.
In a note issued also on Monday, JP Morgan Securities (Asia Pacific) Ltd said that weekly demand in Macau’s casino sector “rebounded nicely” in the seven-day period ended August 18. “This is despite ongoing social unrest in Hong Kong, hence supporting our view that it’s probably more bark than bite when it comes to actual GGR impact,” wrote analysts DS Kim, Jeremy An and Christine Wang.
JP Morgan said last week it expected the protests in Hong Kong to have a minor negative impact on Macau’s casino GGR. “Actual impact on [Macau’s] gaming demand should be smaller than on visitation”, said the brokerage at the time.
Despite the improvement in GGR weekly trends, both Nomura and JP Morgan expect Macau casino revenue for August to still post a decline in year-on-year terms.
“We estimate GGR for the month will settle around MOP25 billion to MOP26 billion,” Nomura wrote in its Monday note. That represents a range between flat growth and a decline of 5 percent compared to August last year.
“We expect positive GGR growth to resume in September, given much easier one-year growth comps,” the Nomura analysts added.
JP Morgan stated that, “while we shouldn’t extrapolate the weekly trend, our recent checks do indicate that volumes for both VIP and mass improved nicely (mid-high-single digit growths from July’s run-rate), despite rather soft VIP luck.” The brokerage said it was keeping its August GGR forecast unchanged at “mid-single-digit decline” – between 4 percent and 6 percent – in year-on-year terms.
Brokerage Sanford C. Bernstein Ltd also issued a note on Monday reviewing GGR trends in Macau for the first 18 days of August. “Delivering positive growth in August would need to rely on outsized VIP volumes and higher hold – something not in our forecast at this time,” stated analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu.
Instead the Sanford Bernstein team said it expected August GGR in Macau to decline by between 2 and 4 percent in year-on-year terms.
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“We expect Las Vegas Sands to not have any material change in strategy. The focus remains developing Macau and Singapore”
Vitaly Umansky, Kelsey Zhu and Tianjiao Yu
Analysts at brokerage Sanford C. Bernstein