Macau’s casino average daily revenue (ADR) for the first 10 days of January trended higher than in the full month of December, helped by the holiday on Friday, January 1, say several analysts quoting unofficial industry returns. Gross gaming revenue (GGR) for January – were the current ADR levels extended across the entire month – indicates a year-on-year fall in the range of 14 percent to 23 percent, they add.
Several analysts suggested that Macau’s ADR for casino tables only between January 1 and 10 was HKD650 million (US$83.8 million), up by about 20 percent compared to the full month of December.
“If we assume an ADR (tables only) of HKD550 million to HKD600 million for the rest of January (compared to HKD542 million for December 2015), full-month January gross gaming revenues (tables only) would be HKD18.1 billion to HKD19.1 billion, implying a 6 percent to 13 percent month-on-month increase and 14 percent to 19 percent year-on-year decline (versus a 35 percent tables-only decline in 2015),” Japanese brokerage Nomura said in a note on Tuesday.
The higher ADR in the first days of January “is likely driven by both VIP and premium mass, and serves as an incremental sign of Macau’s stabilisation,” said a note issued on Monday by analysts Vitaly Umansky, Simon Zhang and Bo Wen at brokerage Sanford C. Bernstein Ltd.
“Assuming an ADR of MOP540 million [US$67.6 million] to MOP580 million for the remainder of this month, January GGR would be MOP18.3 billion to MOP19.5 billion, representing a year-on-year decline of 18 percent to 23 percent,” said the Sanford Bernstein team, adding that their assumption factored in a slowdown in the remainder of the month.
Daiwa Securities Group Inc analysts Jamie Soo, Adrian Chan and Jennifer Wu said they expected to see some sequential softening of run rates towards the end of January, “which is typical of historical trends” ahead of the Chinese New Year holiday period, which this year starts on February 7.
“At current run rates, we expect the full-month January GGR to see a 14 percent year-on-year decline, likely reaching around HKD20 billion,” said the Daiwa analysts.
In Tuesday’s note, Nomura said it expected Macau’s GGR to decline for a third consecutive year in 2016.
“In our view, Macau (especially VIP gaming) is not out of the woods yet, as we expect it to experience three consecutive years of falling GGR (3 percent in 2014, 35 percent in 2015 and 8 percent in 2016),” said the Nomura team.
Analysts at Morgan Stanley Asia Ltd on Monday upgraded their view of the Macau gaming industry to ‘in-line’ from ‘cautious’. The institution however said the sector is still far from bottoming out and that policy concerns remain an overhang.
“After several negative GGR revisions, GGR growth expectations have largely remained stable since July 2015,” said the Morgan Stanley team, adding that earnings before interest, taxation, depreciation and amortisation (EBITDA) margin had largely remained stable since the first quarter of 2015, mass-market revenue decline had narrowed to a single digit in December and that the sector’s valuation had become “much more reasonable”.
“We upgrade the industry to in-line, as our EBITDA expectation for the first half of 2016 is similar to the second half of 2015,” said analysts Praveen Choudhary, Alex Poon and Thomas Allen.
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"There is still no clarity about when border easing for Macau will occur. In the end these changes are needed to see a rebound for Macau business"
Vitaly Umansky, Louis Li and Shirley Yang
Analysts at brokerage Sanford C. Bernstein