Casino gross gaming revenue (GGR) in Macau during June is tracking for a year-on-year decline of between 6 percent and 12 percent, suggest several notes from investment analysts.
It would mark the 25th consecutive month of year-on-year retreat in casino GGR.
“As was the case last year, June typically experiences some of the weakest ADR [average daily rate] numbers in the first half,” said a note issued on Monday by brokerage Sanford C. Bernstein Ltd.
“Assuming an ADR of MOP470 million [US$58.8 million] to MOP550 million for the remainder of this month, June GGR would be MOP15.4 billion to MOP15.7 billion, representing a year-on-year decline of 10 percent to 11 percent, mostly in line with the 10 percent year-on-year decline in May,” said the Sanford Bernstein analysts.
Telsey Advisory Group LLC analysts said they expected June casino GGR to fall by 6 percent year-on-year in Macau.
“We continue to maintain our forecast for a decline of 11.5 percent year-on-year for Macau GGR in 2016,” they added.
Analysts at Japanese brokerage Nomura said in their Monday note: “Month to date, daily GGR is MOP519 million, which is 14 percent lower than the year to date average of MOP605 million. The weakness is due to low play volumes mid-week, coupled with occasionally low hold.”
Nomura added it was expecting June to show a year-on-year fall in casino GGR of between 9.5 percent and 11.8 percent.
Meanwhile Daiwa Securities Group Inc analysts in their Monday note reiterated the risk to Macau of devaluation in China’s currency, the renminbi, against the U.S. dollar.
“In our view, a looming and weakening Chinese yuan [renminbi] will also have other negative impacts on sector fundamentals, including i) the casino operators’ foreign exchange exposures, ii) impairment of Macau’s grey-area liquidity channels, and iii) significant working capital pressures on the junket operators,” said Daiwa.
“Kevin Lai, Daiwa’s chief economist for Asia ex-Japan… argues that the People’s Bank of China [the central bank] has once again quietly devalued the yuan to 6.6375 [against the U.S. dollar],” the brokerage added.
Referring specifically to the Macau casino market, and to new properties from Wynn Macau Ltd and Sands China Ltd, that are due to open respectively on August 22, and on a yet to be announced date in September, Daiwa’s note stated: “The current demand base does not look encouraging against the new openings of Wynn Palace and the Parisian, which will add 13 percent more new hotel rooms to the market (this represents the largest magnitude of incremental new capacity increase to be introduced in the past 30-plus months).”
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings