Fitch Ratings Inc is forecasting that Macau gaming revenues will grow by 12 percent year-on-year in 2017.
First-quarter growth in casino gross gaming revenue (GGR) averaged 13 percent, according to Macau government data. GGR expansion both in February and March was respectively about 18 percent from the prior-year period.
Fitch’s 2017 forecast “assumes low single-digit range month-over-month sequential growth for the balance of the year compared to 4 percent average sequential growth since July 2016,” said the ratings agency in a Wednesday press release.
The full-year estimate took into account “tougher year-over-year comparisons in the second-half of 2017 and the possibility that the tightening monetary policy and increased real estate restrictions may slow economic growth on mainland [China]”, said the authors.
“We expect about equal contribution from VIP and mass market revenues toward achieving Fitch’s 12 percent growth forecast,” Fitch stated.
“VIP growth has been exceeding Fitch’s expectations, growing 17 percent year-on-year in first-quarter 2017,” the release added.
Some investment analysts think that the Macau government numbers on mass-market revenue are currently understated, citing the impact of so-called table reclassification by operators – in order to enable tableside smoking by players to take place at some ‘premium mass’ tables under current Macau casino smoking rules. Other analysts think government data gives a more or less accurate picture, arguing the impact of table reclassification is itself overstated.
Fitch said in its Wednesday release that VIP GGR currently is at a level “similar to that of 2010; therefore, there is a good amount of headroom for growth permitting regulatory and other conditions”. That was understood to be a reference to public policy in Macau and at central government level. A number of investment analysts have said that China is seeking to moderate in general the amount of money moving outside the mainland, including that for gambling in Macau.
“Given the opaque nature of the VIP segment (56 percent of GGR in first quarter 2017), forecasting Macau GGR with a fair amount of certainty is difficult; therefore, we remain cautious,” said Fitch.
It added: “The mass market will be driven by healthy consumer spending… and increasing room capacity, which encourages longer average length of stay. Longer term, we believe mass-market gaming remains underpenetrated in the Asia Pacific region.”
