January’s expected year-on-year growth rate in Macau’s monthly casino gross gaming revenue (GGR) could be the highest since the beginning of a recovery trend dating from the second half of 2016. That is the suggestion in a note issued on Sunday by brokerage Union Gaming Securities Asia Ltd.
“January is likely to be a big growth month,” stated Union Gaming analyst Grant Govertsen, pointing out that the Chinese New Year holiday late in the month was likely to boost gambling numbers in the city’s casinos. The annual holiday is usually a peak season for Macau’s gaming industry as hundreds of thousands of mainland Chinese tourists take advantage of the week-long break to visit the city.
“Even though the January calendar is unfavourable with one fewer Friday and one fewer Saturday [than January 2016], we expect the growth rate could be the highest yet during the recovery period,” said the analyst. The brokerage dated the start of the recovery not from August 2016, when the sector returned to year-on-year monthly GGR growth; but from June, when daily average casino GGR per month – i.e., a number not adjusted for casino hold rates – started showing some consecutive improvement.
The expected boost to January “is because Chinese New Year shifts from February last year to January this year (28 January 2017 versus 8 February 2016) – although given the late January date some of the Chinese New Year benefit will trickle into February,” Mr Govertsen added.
Also in a Sunday note, Deutsche Bank Securities Inc estimated that January GGR could grow by 12 percent in year-on-year terms, positively affected by the Chinese New Year holiday period. “As always, given the volatility around Chinese New Year, we believe it is best to look at January and February on a combined basis,” analysts Carlo Santarelli and Danny Valoy wrote.
Macau’s accumulated GGR for full-year 2016 fell 3.3 percent compared to the tally for 2015, according to data released on Sunday by the city’s regulator, the Gaming Inspection and Coordination Bureau. It meant Macau has experienced three consecutive years of annual GGR decline.
But the final month of 2016 marked the fifth in consecutive months of year-on-year improvements in the monthly tally of GGR. During that period, the fastest monthly GGR year-on-year growth rate was recorded in November, when gaming revenue increased by 14.4 percent.
“June’s daily average [GGR] of MOP529 million (US$66.2 million) appears to have been the low-water mark of the multi-year downturn,” wrote Union Gaming’s Mr Govertsen, adding that December’s GGR daily average of MOP639 million represented 21 percent growth relative to June.
“This growth in GGR actually exceeded the growth rates in supply over the same period [for:] hotel rooms (+15 percent when comparing December 2016 to June 2016); table games (+6 percent); and slot machines (+8 percent). With more modest increases in supply in 2017 we remain upbeat about the growth prospects next year,” stated Mr Govertsen.
Brokerage Sanford C. Bernstein Ltd had mentioned in a December 16 note that Macau casino operators were likely to need more hotel capacity in order to overcome “bottlenecks” caused by spiking demand at weekends and public holidays.
Macau had 36,100 guest rooms in the city’s registered hotels and guest houses as of November 30 – a year-on-year growth rate of 14 percent – according to hotel occupancy data for November released on December 29 by the Statistics and Census Service.
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"Given the opaque nature of the VIP segment (56 percent of gross gaming revenue in first quarter 2017), forecasting Macau GGR with a fair amount of certainty is difficult; therefore, we remain cautious"