Macau’s Secretary for Economy and Finance, Lionel Leong Vai Tac, said on Wednesday that the government was not unduly concerned about a slight decline in casino gross gaming revenue (GGR) in the first four months of 2019. The official stated that the city’s gaming industry remained resilient and welcomed a shift in the market, with the mass segment taking the leading position.
Casino GGR in Macau fell by 8.3 percent year-on-year in April, to approximately MOP23.59 billion (US$2.92 billion), showed data from the city’s regulator published on Wednesday. It meant the Macau market’s GGR tally for the first four months of 2019 stood at nearly MOP99.74 billion, a year-on-year contraction of 2.4 percent.
Speaking to reporters that same day, Mr Leong (pictured in a file photo) said the market should not expect Macau’s gaming sector to report strong GGR growth like it did in the past. But the industry had become more sustainable, on the basis the mass-market segment was now driving the industry, he added.
“Progressively, the structure [of the Macau gaming market] is changing. I think this kind of change fits [better] into our [strategy of becoming] a world centre of tourism and leisure,” said Mr Leong, as quoted by the Portuguese-language radio service of Macau public broadcaster TDM.
According to data for the first three months of 2019, VIP baccarat was a drag on Macau’s GGR performance, falling 13.4 percent from the prior-year period. The rate of VIP decline was offset by the 16.1-percent growth recorded for GGR in the mass segment. Mass-market revenue as a proportion of all casino GGR in the period stood at 51.14 percent, taking the lead in the Macau market for the first time.
In his Wednesday remarks, Mr Leong said the Macau government “wants to see the mass market grow, instead of the whole cake depending on the VIP [segment].”
He added: “[This new structure] will also benefit the [city’s] small- and medium-sized enterprises, so I prefer to see this happen.”
Investment analysts covering the Macau gaming industry have said they expect positive growth to resume once the city laps – after the opening months of 2019 – the tough year-on-year comparisons with 2018.
Brokerage JP Morgan (Asia Pacific) Securities Ltd said it estimated VIP roll and GGR to have declined in the range of 23 percent to 25 percent year-on-year in April, “to the lowest level in 2+ years”, while mass “remained a bright spot” and grew between 4 percent and 5 percent.
Addressing the topic of the moderating demand in the VIP segment, JP Morgan analyst DS Kim said the institution’s junket contacts suggested “almost unanimously” that recovery “will be difficult to come by any time soon”.
“They [junket contacts] cite multiple reasons, such as tighter capital control and rising scrutiny on underground banks, ever-rising regional competition, smoking ban on VIP areas, [and] President Xi [Jinping]’s planned visit in December, among others,” wrote Mr Kim in his Wednesday memo.
The brokerage forecast May GGR to rebound between 2 percent and 4 percent from the prior-year period.
Union Gaming Securities Asia Ltd said Macau’s mass-market segment “continues to roll along with growth approaching 20 percent, driven by a combination of modestly-higher foot traffic and modestly higher spend per visit”.
“For the whole of the second quarter of 2019, we are forecasting -2 percent growth based on a mid-single digit growth story in June,” said a Wednesday note from analyst Grant Govertsen.
He added: “As we look out through the balance of the year, we are slightly revising our full-year forecast to low single digits (from mid-single digits) with VIP, of course, being the wild card that could materially change this forecast in either direction.”
In his memo, Mr Govertsen also noted that the election process to identify Macau’s next chief executive – to be held later this year – could have some negative impact on the casino industry.
“We caution that election season will be upon Macau soon and this could have an impact later this summer as individuals [consumers] might defer trips until after the Chief Executive election period is over,” wrote the Union Gaming’s analyst.
Ho Iat Seng, currently president of Macau’s Legislative Assembly, was the first and so far only person to declare as a candidate for this year’s process to select the next Chief Executive.
On Wednesday, Mr Leong said he would not run for the top position in the city’s government, assuring the public that he would complete his current term as a government secretary. Mr Leong had previously been mentioned as a potential candidate to succeed the incumbent Chief Executive, Fernando Chui Sai On.
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Analyst at Roth Capital Partners