GGRAsia – Investors still cautious on Macau casinos: Nomura

Investors still cautious on Macau casinos: Nomura

Aug 27, 2014 Newsdesk Latest News, Macau, Top of the deck

The recent declines in gross gaming revenue (GGR) and other negative news coming out of Macau’s casino industry is putting off investors, warns brokerage firm Nomura.

“Investors we met with were generally cautious/bearish on the sector near-term given a lack of positive catalysts,” analyst Louise Cheung wrote on a note released on Wednesday, following a marketing trip to Singapore and Kuala Lumpur the week before.

“We also met a fair amount of investors who are waiting on the sidelines,” Ms Cheung added.

August gaming revenue in Macau is tracking for a decline of 4 percent to 6 percent year-on-year, said a note from investment bank Credit Suisse AG released earlier this week. If the final monthly tally confirms that prediction, it would mean three consecutive months of year-on-year decline for the city’s GGR.

Ms Cheung said investors are expecting a seasonal VIP revenue increase on the October Golden Week, after continued decline for most of the year to date. “While most operators have disclosed plans to open new VIP rooms, the exact timing remains vague, so it is unclear if those rooms will benefit October’s GGR,” she cautioned.

Investors are meanwhile still looking for a clear-cut explanation for July’s weak mass GGR growth. Analysts say growth slowed from 24 percent year-on-year in June to 17 percent in July. The Macau regulator does not provide a monthly breakdown of revenue; it only makes public the headline figure for market-wide GGR.

So far, the only explanation put forward cites changes to transit visa rules – whereby some mainland residents used travel visas issued by other countries to make a side trip to Macau, a practice mainly employed by travellers at the high end of the gambling market.

Data from Macau’s Statistics and Census Service show the city welcomed 1.87 million visitors from mainland China in July, up by 12.7 percent in year-on-year terms. In the first half of the year, the number of tourists from mainland China increased by 14.7 percent. That growth drops slightly to 14.4 percent when July is accounted for.

The unexpected slowdown in mass GGR growth has left many cautious on the segment, the Nomura analyst noted.

The good news is that investors “do not seem overly concerned” about the October 6 smoking ban in mass casino floors, given at least some VIP and premium mass areas will remain smoking, Ms Cheung stated. “But we note there could be some temporary disruption, as grind mass players will have to adapt to a new behaviour of going to the smoking pods,” she added.