The Macau government’s 2015 forecast for gross gaming revenue (GGR) is “significantly more bearish than Street estimates” said a note on Monday from Wells Fargo Securities LLC
Macau’s Chief Executive Fernando Chui Sai On announced earlier that day – during his annual policy address – that the government expected average monthly GGR of MOP20 billion (US$2.5 billion) this year. That was down from an earlier estimate of MOP27.5 billion, Mr Chui said.
“This implies -32 percent year-on-year growth, versus our -19 percent estimate,” said the note from Cameron McKnight and his colleagues Rich Cummings and Tiffany Lee, referring to the whole of 2015.
The Macau and mainland governments – via policy levers including visa issuance to mainland visitors – can have a direct impact on the industry’s growth or on its slowing, say many investment analysts. Mr Chui mentioned in his address a number of policy initiatives including a closer scrutiny of, and improved regulation for, the Macau casino sector.
Mr Chui on Monday also said he was “cautiously optimistic” over the city’s economic development. The policy document announced increases in several welfare subsidies, but the Chief Executive reiterated that the government would be cautious about its budget due to the slowdown in GGR.
The administration that day also said it would send a revised budget to the Legislative Assembly. The amended budget proposal for 2015 cuts the government’s revenue forecast to MOP119.97 billion, from the original forecast in November of MOP154.66 billion.
The government is now expecting a surplus of MOP18.81 billion for this year, down by 63.7 percent from an initial estimate of MOP51.86 billion. The Macau government ended 2014 with a surplus of MOP90.30 billion, according to preliminary data from the city’s Financial Services Bureau.
The revised budget took into consideration the consecutive drop in the monthly tally of GGR since June and the impact that would have on the city’s gross domestic product, the government said.
Macau’s economy shrank 17 percent in the final quarter of last year as casino revenues slipped 2.6 percent for the full-year, the first-ever annual decline.
Junket closures slow
A slightly more upbeat commentary on Macau came from Credit Suisse AG on Monday. The bank said that the closure of small- and mid-sized casino junkets in Macau had “gradually stabilised” and another round of closure is “unlikely into April ahead of [the] Labour Holiday Golden Week”. The latter is a reference to the holiday period straddling the May 1 holiday observed across China.
The Credit Suisse team of Kenneth Fong and Isis Wong added that based on unofficial industry returns up to Sunday, Macau appeared to be heading for a year-on-year decline in March GGR of between 35 percent and 39 percent, to MOP21.7 billion.
Michael Ting of CIMB Securities Ltd in Hong Kong on Monday estimated March GGR would fall by 39 percent year-on-year, based on checks for the seven days ending March 22.
“The 39 percent year-on-year decline is slightly worse than our forecast of a 37 percent year-on-year decline that we had predicted last week. For March, we estimate that VIP revenue will fall 51 percent year-on-year and mass [market] will decline by 19 percent, post table reclassification,” added Mr Ting, referring to reports some Macau casino operators have reclassified some mass tables to VIP following the tableside smoking ban on casino mass floors introduced in October.
Daiwa Securities Group Inc analysts Jamie Soo and Adrian Chan think March GGR is likely to slip 37 percent to 38 percent, based on daily numbers for March 16 to 22.
Daiwa also suggested that so far this month Wynn Macau Ltd’s market share of GGR had improved by 2.6 percentage points to 11 percent. Morgan Stanley Research Asia Pacific said in a note a week ago that Wynn had allowed its junkets to resume taking telephone bets on behalf of VIP players after banning the practice last autumn. Daiwa had earlier said that any Macau operators banning proxy betting were likely to lose market share.
The most bearish of a selection of notes on March revenue came from Japanese brokerage Nomura. Analysts Harry Curtis, Kelvin Wong and Brian Dobson assumed – based on daily GGR for the third week of March – a decline for the whole month of 38 percent to 41 percent judged year-on-year.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China