The Macau casino market might return to year-on-year growth in gross gaming revenue (GGR) in May if current consumer demand remains stable throughout the rest of the month, said a Monday note from brokerage Sanford C. Bernstein Ltd.
The brokerage suggested – based on its own channel checks – that Macau’s GGR for the first five days of May was about MOP5.5 billion (US$680.5 million), a month-to-date average daily rate (ADR) of circa MOP1.1 billion. According to Sanford Bernstein, the month-to-date ADR in the opening five days of May was 40 percent higher compared with April and up 18 percent versus similar period in May last year.
“[The] ADR improved on a lengthened Labour Day holiday in China, bringing in higher Chinese traffic,” wrote Sanford Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu in their Monday note. “VIP hold rate is estimated to have normalised from the higher hold rate [in the] last two months. Mass and VIP volume is estimated to be up double digits [in percentage terms] month-on-month,” they added.
The holiday period in China encompassing Labour Day lasted four days this year, i.e., May 1 to May 4, compared to three days in 2018. The volume of visitors to Macau during the first three days of the holiday period increased 37.0 percent year-on-year, said Macau’s tourism promotion body.
Sanford Bernstein said it estimates GGR growth in May to range from +2 percent to +4 percent year-on-year.
“We expect year-on-year comparison to be difficult through mid-May, as GGR was quite robust in early 2018, until U.S.-China trade tensions heightened beginning last summer, but we may see surprise on the upside if VIP rebounds,” said the brokerage’s team.
It added: “One area of potential high end GGR stabilisation and renewed strength may come from a recovering credit cycle in China which may support VIP recovery in the second half.”
Official figures indicate that casino GGR in Macau was MOP23.59 billion (US$2.92 billion) in April, 8.3 percent less than a year earlier. GGR in the first four months of this year was nearly MOP99.74 billion, down 2.4 percent from the prior-year period.
Nomura Instinet LLC said also in a Monday memo that gaming demand in the first five days of May “was probably stronger than most analysts expected”. But the Japanese brokerage cautioned against extrapolating results from a single data point, “as variability in the weekly data [in the Macau market] can be substantial, especially during holiday periods”.
The Nomura team estimated that average daily VIP volume was tracking about 70 percent higher sequentially, while VIP hold percentage stood at 2.8 percent, “toward the low end of the ‘normalised’ hold range”. Mass-market GGR per day was estimated up circa 35 percent versus the average in April.
“Assuming May GGR lifts sequentially in line with its trailing seven-year average … we estimate GGR for the month will settle around MOP25 billion to MOP26 billion,” wrote Nomura’s analysts Harry Curtis, Daniel Adam and Brian Dobson.
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“We see that basically the ‘golden’ periods [for Macau's casino industry] are all concentrated in the second half of this year”
Lei Wai Nong
Macau’s Secretary for Economy and Finance