Several investment analysts covering the Macau gaming sector say they believe growth in the city’s casino sector could resume soon, ending a slump that started in June 2014.
Casino GGR in Macau declined by 4.5 percent year-on-year in July, marking 26 consecutive months of retreat, show official data published on Monday. Judged on a month-to-month basis, GGR increased by 11.9 percent, to MOP17.77 billion (US$2.22 billion).
The July result was “better than consensus at -5.5 percent,” said Union Gaming Securities Asia Ltd analyst Grant Govertsen in a note on Monday. “We believe that mass market was likely up in the mid single digits (or better) while VIP continues to be mired in double-digit declines,” he added.
GGR for the year to date is down 10.5 percent compared to the prior-year period, an improvement from a fall of 11.4 percent during the January to June period.
“We maintain our view that the second half of 2016 should experience a pick up in year-on-year growth driven by a slowing decline in VIP GGR and new project openings,” said brokerage Sanford C. Bernstein Ltd in a Monday note.
“For August, we estimate GGR to increase by [about] 2 percent year-on-year to approximately MOP19 billion (MOP615 million per day),” said Sanford Bernstein’s analysts Vitaly Umansky and Clifford Kurz.
They added: “The opening of Wynn Palace on August 22, should provide a bump in GGR, as will the pick up in seasonal base mass visitation. We estimate VIP to decline mid-single digits year-on-year and mass to improve by high single digits year-on-year.”
David Katz and Brian Davis, of Telsey Advisory Group LLC, stated in a Monday memo to investors regarding July’s results in Macau GGR: “While weaker than what the checks were indicating, this is an improvement over June’s -8.5 percent result, and is supportive for the related stocks. “
Macau’s Secretary for Economy and Finance, Lionel Leong Vai Tac, said on Friday that it was difficult for the government to predict the city’s gaming revenue for the second half of 2016, given the uncertain and volatile environment in international markets.
Mr Leong said in July that the government expects overall casino GGR in the city to continue declining but at a slower pace in the second half of 2016.
Union Gaming said it expects the first few days of August to experience “lower-than-recent-normal daily GGR” as Typhoon Nida closes in on the Pearl River Delta region, resulting “in lighter visitation as regional visitors might defer trips”.
“We further assume that the first three weeks of August will be negatively impacted by some number of higher value customers deferring their trips to Macau as they wait for the openings of Wynn Palace on August 22 and Parisian Macao on September 13,” said Union Gaming’s Mr Govertsen.
The brokerage however expects the last week of August “to be strong” as it benefits from the opening of Wynn Palace. “All in, we’re currently forecasting a GGR decline of 3 percent to 7 percent in August, with the midpoint at MOP17.5 billion,” said Mr Govertsen.
“Starting in September we expect to see the market return to growth on the heels of the openings of Wynn Palace and Parisian Macao,” he added.
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”We expect Okada [Manila] to add US$1.2 billion of GGR by 2019 to the overall market, capturing 32 percent market share”
Alex Poon and Praveen Choudhary
Analysts at Morgan Stanley