GGRAsia – Macau mass play weakness extends to November: analysts

Macau mass play weakness extends to November: analysts

Dec 03, 2014 Newsdesk Latest News, Macau, Top of the deck

Mass table games revenue in Macau fell 13 percent year-on-year in November, according to unofficial industry returns quoted by a number of investment analysts. Macau’s total gross gaming revenue (GGR) for November fell 19.6 percent year-on-year to MOP24.27 billion (US$3.04 billion), said the city’s casino regulator on Monday.

“By segment, VIP was down 23 percent (or 27 percent adjusted for Melco Crown Entertainment Ltd’s premium mass revenue reclassification) and mass by 13 percent (or 7 percent adjusted) in November,” said a note from Credit Suisse AG analysts Kenneth Fong and Isis Wong.

The impact of Melco Crown’s conversion of some tables from premium mass to VIP in response to the government’s smoking ban for mass gaming floors introduced on October 6 “has caused a lot of confusion in the market and also made it harder to assess the true mass market momentum,” Mr Fong and Ms Wong said in Wednesday’s note.

“Despite an easier year-on-year comparison in November, we saw no sign of improvement.”

They added: “Adjusted November mass revenue was the worst since September 2013, suggesting fundamentals have yet to bottom, in our view.”

The analysts said additional factors other than table reclassification were likely to affect the mass market in December. “With a stricter enforcement of the transit visa rule from Zhuhai starting December, we believe mass could see more pressure near-term,” wrote the Credit Suisse team.

The Zhuhai authorities are expected to start strictly enforcing the transit visa rule to Macau. It requires mainland travellers using a transit visa to present a valid air ticket to a third country rather than offering an email confirmation as had previously been required, Chinese-language Macao Daily News reported.

Macau in June reduced to five days, from seven days, the permitted stay for mainland Chinese passport holders who transit in the city. The new rules were effective from July 1.

“This time, the stricter enforcement is initiated by the Zhuhai government (Mainland China side) instead of Macau. This may send a signal to the industry that the Chinese government also wants to close the loophole and that it is unlikely to have any loosening policies on visa in the near term, in our view,” said the Credit Suisse analysts.

The rate of year-on-year decline in the city’s mass-market gambling revenue gathered pace in November compared to October. Continued weakness in the mass segment could contribute to margin pressure in the Macau gambling market, according to investment analysts.

In a note on Tuesday, Wells Fargo Securities LLC said November segment results were also impacted by mainland China policy settings, specifically: “Visa restrictions, the anti-corruption drive, a pullback in credit, and a soft housing market.”

“We remain on the sidelines as uncertainty remains high,” said the Wells Fargo team lead by analyst Cameron McKnight.

Analysts now say that further deceleration is likely into December. Carlo Santarelli of Deutsche Bank AG is projecting GGR in Macau to fall by 22.2 percent in December from a year ago, with the mass-market segment expected to decline 6 percent.

For the full year 2014, GGR is projected to be 1.8 percent lower than it was in 2013, said Mr Santarelli. The accumulated total for the first 11 months of 2014 stood at MOP328.24 billion, a year-on-year rise of only 0.3 percent.