GGRAsia – Macau GGR growth to ease, mass ramps up: Bernstein

Macau GGR growth to ease, mass ramps up: Bernstein

Jul 20, 2018 Newsdesk Latest News, Macau, Top of the deck

Growth in Macau gross gaming revenue (GGR) will trend downwards from the fourth quarter onwards, according to Sanford C. Bernstein Ltd. The brokerage says Macau’s GGR is “now entering a decelerating environment” with the mass-market segment ready to outperform the revenues from the VIP segment, which has traditionally been the backbone of industry growth.

In the report released on Friday, the brokerage said it expected GGR to expand by 14 percent this year – with 12 percent growth in VIP and 17 percent growth in the mass-market – and decelerate to 4 percent growth next year on the back of 8 percent growth in the mass-market segment. The report anticipated that the VIP segment would stagnate or decline slightly next year, perhaps dragging down GGR in the premium mass segment.

Data from Macau’s casino regulator, the Gaming Inspection and Coordination Bureau, indicate that Macau casino GGR grew to MOP73.71 billion (about US$ 9.18 billion) in the second quarter of this year, 17.2 percent more than a year earlier; that VIP-market GGR grew by 14.4 percent to MOP41.04 billion; and that mass-market GGR grew by 20.8 percent to MOP32.67 billion.

The regulator, also known as DICJ, released the data for the second quarter earlier this week.

Assuming that new casinos open as planned and the absence of any economic disruption in mainland China that harms the gaming business in Macau, for the period 2017 to 2022, Bernstein analysts Vitaly Umansky, Zhen Gong and Kelsey Zhu estimated that the compound annual growth rate (CAGR) in GGR would be about 10 percent – no change from the institution’s previous estimate – and that the CAGR in VIP-market GGR would be 7 percent and the CAGR in mass-market GGR 12 percent.

The research note said the recent correction in Macau gaming stocks showed investors had a more measured and less bullish attitude to them.

In view of second-quarter Macau GGR being was less than had been expected and amid investor worries about the Chinese economy slowing, Sanford Bernstein said it was trimming its estimates for all the Macau gaming stocks. It expected some operators to report “very weak results” for the second quarter, and identified MGM China Holdings Ltd and Melco Resorts and Entertainment Ltd among the firms likely to be the worst-performing Macau operators.