Macau July daily take hints at 35 pct decline: analysts
July gaming revenue in Macau is tracking for the slowest monthly rate of year-on-year decline since January, with analysts expecting a 35-percent drop year-on-year in casino gross gaming revenue (GGR) this month.
Brokerage Sanford C. Bernstein Ltd in Hong Kong said in a note on Monday that July GGR might also show some sequential stabilisation and improvement from June’s numbers.
“Our industry channel check indicates that Macau GGR for the month through July 19 was MOP11.2 billion [US$1.4 billion]. The ADR [average daily revenue] last week was MOP585 million, in line with June’s ADR of MOP579 million. On an ADR basis, we believe July may show some stabilisation and improvement month-over-month,” said analysts Vitaly Umansky, Simon Zhang and Bo Wen.
They added: “Assuming ADR of MOP580 million to MOP600 million for the remainder of this month, we estimate July GGR to be MOP18.2 billion to MOP18.4 billion, representing a year-on-year decline of 35 percent to 36 percent.”
Macau casino GGR for the first six months of 2015 stands 37.0 percent lower than in the same period in 2014. The decline was 36.2 percent year-on-year in June to about MOP17.36 billion – the slowest monthly rate of year-on-year decline since January, when the market contracted by 17.4 percent.
Cameron McKnight of Wells Fargo Securities LLC estimates gaming revenue will decline by between 34 percent and 36 percent in July.
“This assumes July same store ADR will trend in line with historical seasonality and takes into account the ramp of Galaxy Phase II. We are assuming roughly MOP600 million to MOP625 million for the remainder of July, which takes into account recent seasonality of some relative strength in [the] back half of the month,” Mr McKnight said in a note on Monday.
Several investment analysts have stated that they hope to see gaming performance at Galaxy Macau Phase 2 and at the next door Broadway at Galaxy Macau ramp up soon. The two Cotai properties, developed by Macau casino operator Galaxy Entertainment Group Ltd, opened on May 27.
Analyst David Bain of U.S.-based brokerage Sterne Agee CRT said in a note on Monday that Galaxy Macau Phase 2 impact has been “muted to date”.
For the week ended July 19, “table GGR was down nearly 4 percent week-over-week, despite the opening of Galaxy’s Macau’s new premium mass offering, the ‘Horizon’ on July 10 as well as more benign weather (the previous week had typhoons),” said Mr Bain. The facility, with 19 tables and three private gaming rooms, is only for invited guests.
Mr Bain added: “Galaxy Macau’s US$2.6 billion expansion is off to a slow start, not boosting results beyond Macau’s month-over-month GGR averages. While it was not necessarily forecasted to do so, there was certainly investor ‘hope’ for more of an impact.”
The analyst additionally said that the muted impact from the opening of Galaxy Macau Phase 2, “may cause investor scepticism ahead of an additional US$14.1 billion of [rival] property opening investments through 2016”.
In Monday’s note, Mr Bain said the GGR run rate for the month through July 19 “indicates a -35 percent year-over-year monthly result”, or about MOP18.4 billion. “The current run-rate suggests a +7 percent month-on-month result,” he added.
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