Macau’s June casino gross gaming revenue (GGR) is likely to be the peak of 2017’s year-on-year growth comparisons, at circa 30 percent expansion.
So said a Sunday report from Deutsche Bank Securities Inc analysts Carlo Santarelli and Danny Valoy, following a recent visit to Macau to meet “local management teams and industry contacts”.
The report stated: “Most expect June will represent the peak of year-on-year GGR growth comparisons (circa +30 percent). Net-net, we weren’t able to identify that next leg of market acceleration, and believe the most likely trajectory from here is a deceleration in comparisons, which, at current [stock price] levels, keeps us on the sidelines.”
The institution suggested – as have other investment analysts – that growth in VIP play has been a big factor expanding Macau casino GGR in recent months. The local gaming regulator, the Gaming Inspection and Coordination Bureau, only gives the split between mass-market and VIP GGR on a quarterly basis, usually some days after each reporting quarter.
First-quarter VIP casino GGR expanded by 16.8 percent year-on-year, while mass-market casino GGR – including that from slot machines – rose by 8.5 percent from the prior-year period.
Mr Santarelli and Mr Valoy said in their Sunday note, regarding the second-half outlook for VIP: “While obvious red flags aren’t present, as [VIP gambling loss] repayment cycles remain healthy at approximately 20 days, junket balance sheets remain heavily skewed towards customer deposits (80 percent of liquidity), a stark contrast to the casino credit-heavy balance sheets of the 2013 VIP environment.”
A late March note from analyst David Bain of Aegis Capital Corp, had mentioned there was “investor debate on the sustainability of the VIP rebound”.
Deutsche Bank noted in its Sunday memo that what it termed “crackdown activity in the Philippines” and events in China involving employees of Australian casino operator Crown Resorts Ltd, had “benefited the Macau VIP environment”.
That was understood to be a reference first, to enforcement action against – and subsequent closure of – betting operations in the Philippines controlled by Chinese investor Jack Lam Yin Lok amid allegations by the government there of illegal online betting business; and second to action by mainland Chinese authorities against some staff of Australian casino operator Crown Resorts Ltd. The names of several – including Jason O’Connor, executive vice president for international VIP business – are mentioned in relation to a hearing due in a Shanghai court on June 26 of charges concerning “gambling-related crimes”.
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”Many investors cite Golden Week as a catalyst to significant, sustainable visitation increases and a showcase for profitability for many casinos [in Macau]... However… we are concerned recovery estimates may again be pushed back”
Analyst at Roth Capital Partners