Average daily revenue (ADR) at Macau casinos is softening as VIP play shows no sign of recovery and mass-market business remains soft, say a number of investment analysts.
“Up to November 16, Macau noted gross gaming revenue (GGR) of MOP12.75 billion [US$1.6 billion], implying ADR of MOP797 million, [continuing] to track lower than the ADR of MOP850 million in October (post-Golden Week holiday) and MOP852 million for September,” said a note from Credit Suisse AG.
“The ADR last week (November 10-16) further decelerated to MOP750 million. The [Macau] Grand Prix race during November 13-16 may [have] hurt revenue, but an 11 percent week-on-week decline appeared to be weak,” said analysts Kenneth Fong and Isis Wong.
The Credit Suisse team said full-month GGR might drop by 18 percent to 21 percent year-on-year to between MOP24.0 billion and MOP24.7 billion, “assuming ADR of MOP800 million to MOP850 million for the rest of November”. That would be worse than the expected low- to mid-teens decline, they added.
Some Macau casino operators have reported shorter playing time on devices following the smoking ban on mass casino floors enforced on October 6, analysts at UBS Securities Asia Ltd wrote in a note on Tuesday.
“Some [operators] also believe players usually build their bets up gradually, and smoking breaks mean these players re-start their play at lower bets, resulting in lower overall play,” analysts Anthony Wong and Angus Chan said.
On a conference call earlier this month, management at Melco Crown Entertainment Ltd said it had seen some negative impact on gambling activity because of the smoking ban.
“We estimate these drags could have impacted mass by 6 to 13 percentage points. Combined with continued slowing in high-end demand, we see these factors driving underlying mass growth (-5 percent in October) to be below consensus expectations of single digit growth in the fourth quarter,” said the UBS analysts.
“We forecast November full month to drop 17 percent to 22 percent (October -23 percent); headline VIP/mass at -20 percent to -25 percent/-10 percent to -15 percent,” they added.
Wells Fargo Securities LLC also said it viewed last week’s results as “softer than expected”.
“Our checks suggest that hold is normal but mass revenues remain weak (negative),” said Wells Fargo analysts led by Cameron McKnight.
“We remain on the sidelines regarding the Macau market, as we believe China policy settings are negatively affecting growth. In particular, we see (1) visa restrictions, (2) the anti-corruption drive, (3) a pullback in credit, and (4) a softening housing market all contributing to a slowdown in Macau,” the brokerage said.
“We now estimate November Macau gaming revenue growth of -18 percent to -21 percent versus our prior -16 percent to -18 percent estimate,” the Wells Fargo team added.
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”We expect Okada [Manila] to add US$1.2 billion of GGR by 2019 to the overall market, capturing 32 percent market share”
Alex Poon and Praveen Choudhary
Analysts at Morgan Stanley