Macau gross gaming revenue (GGR) in December could be heading for a year-on-year decline of about 30 percent, spurred by continuing softness in VIP play and lacklustre performance in the mass market table games segment, say three research houses, based on unofficial returns covering the first two weeks.
“Up to 14 December, Macau noted GGR of MOP10.54 billion [US$1.3 billion], implying average daily revenue (ADR) of MOP753 million month to date or MOP698 million for the past six days,” said Credit Suisse AG analysts Kenneth Fong and Isis Wong.
“This is lower than the ADR of MOP809 million in November and first week of December of MOP794 million [following] a stricter transit visa rule enforced in Zhuhai side since early December,” they added.
“The trend is much weaker than ours and street’s expectation of [about] MOP800 million.”
The Credit Suisse team said December casino GGR is tracking to a 29 percent to 31 percent year-on-year decline.
“Assuming ADR of MOP730 million to MOP780 million for the rest of December (factoring in the slower demand during President Xi’s visit on December 19-20 and a slight pickup into Christmas) the GGR of this month may drop by 29 percent to 31 percent year-on-year to MOP22.95 billion to MOP23.8 billion,” said Mr Fong and Ms Wong.
Factors like the reclassification of some tables from premium mass to VIP in October following the implementation of a smoking ban on mass casino floors, and a stricter enforcement of the transit visa rule from Zhuhai starting this month are adding pressure to mass play, which is expected to decline further in December, according to analysts.
“Given the high base of December 2013 mass revenue, stricter enforcement of transit visa rule and our traffic check indicate that the mass revenue is slightly weaker than November … on a like-for-like basis, we believe VIP would be down around 33 percent to 37 percent year-on-year while mass would be down 10 percent to 15 percent (worsen from -6 percent over October and November),” said the Credit Suisse analysts.
Beijing has confirmed President Xi Jinping’s two-day visit to Macau starting on Friday, where he will attend the 15th anniversary of Macau’s return to China and the inauguration ceremony of the territory’s fourth-term government.
Cameron McKnight of Wells Fargo Securities LLC said President Xi’s visit this upcoming weekend “could further pressure the monthly result”.
“We see the potential for further downside risk to our below consensus fourth quarter Macau company estimates,” said Mr McKnight. “Based on checks through December 14, we estimate December Macau gaming revenue growth of -30 percent versus our prior -23 percent to -27 percent estimate,” he added.
Japanese finance house Nomura said softness in Macau’s GGR “is likely to continue until security eases again, which is probably early next week”, after President Xi’s visit to the city.
“We model Macau’s daily GGR for the remainder of December to be MOP650 million to MOP750 million, implying a decrease of 30 percent to 35 percent, or MOP21.6 billion to MOP23.3 billion,” Nomura said.
The finance house also expects mass/VIP mix for December to be distorted by table reclassification. “It will cause confusion among investors, and it may not be until companies report fourth quarter results that investors get an accurate read on the real trend in mass and mass margins (only MPEL [Melco Crown Entertainment Ltd] has announced table reclassification so far; we believe that MGM [China Holdings Ltd] has also reclassified tables),” added the note.
Nomura last week said President Xi’s visit might bring little help to Macau’s struggling casino industry since chances for gifts are slim.
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"I am not going to speculate on what the [casino licence refreshment] tender requirements would be. I have full confidence and faith in the Macau government to treat everyone fairly"
Wilfred Wong Ying Wai
President and chief operating officer of Macau-based casino operator Sands China