Casino gross gaming revenue (GGR) in Macau is on track for a 20-percent decline in November measured in year-on-year terms, says Credit Suisse AG.
“Up to November 23, Macau noted GGR of MOP18.7 billion [US$2.3 billion], implying average daily revenue of MOP813 million month-to-date, lower than the average daily revenue of MOP850 million in October (post-Golden Week holiday),” Hong Kong-based analysts Kenneth Fong and Isis Wong wrote in a note released on Tuesday.
They added: “The average daily revenue last week (November 17 to 23) picked up week-on-week to MOP850 million from MOP750 million post-[Macau] Grand Prix, coming in at the high-end of our expected range of MOP800-850 million… Assuming average daily revenue of MOP800-850 million for the rest of November, the GGR of this month may drop by 18 percent to 20 percent year-on-year to MOP24.3-24.7 billion.”
Mr Fong and Ms Wong noted that despite the week-on-week improvement, mass business remained “soft”. Credit Suisse estimated mass GGR could fall by as much as 6 percent in year-on-year terms for November as a whole. The bank expects VIP revenue to decline by up to 28 percent.
Standard Chartered meanwhile lowered its GGR forecast for next year. “We now expect a 2-percent contraction in GGR in 2015, followed by growth of 10 percent in 2016 and 10.5 percent in 2017,” Hong Kong-based analyst Philip Tulk wrote in a note released on Tuesday.
He added: “For 2015, we expect VIP GGR to contract by 10 percent (1H15: -18 percent, 2H15: flat), and mass/slots GGR to rise by 11 percent. We estimate a 1 percent contraction in GGR in 2014.”
Standard Chartered cut its estimates for earnings before interest, taxation, depreciation and amortisation (EBITDA) for Macau operators by an average of 21 percent in 2015 and 26 percent in the following year. Based on these cuts, the bank reduced its price targets for those companies by an average of 29 percent.
“Street estimates appear far too optimistic,” Mr Tulk wrote.
He explained: “We continue to like Macau as a longer-term, secular growth story given the expected growth of China’s middle class, Macau’s currently low penetration into China overall, and an apparent commitment by the central government to the development of Macau as a destination for general tourism… We do think valuations need to become more rational, however.”
Analysts Jamie Soo and Adrian Chan, from Daiwa Capital Markets in Hong Kong, stated in a note on Monday that “all eyes will be on the emerging trends performance during Lunar New Year”, which next falls in February 2015. “Industry participants expect the casino operators to be much more aggressive in driving business/defending market shares, if performance is lacklustre for two consecutive busy seasons (October Golden Week being the first disappointment),” they added.
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