October gaming revenue in Macau is tracking for the steepest decline so far this year, with analysts expecting an over 20-percent drop year-on-year in casino gross gaming revenue (GGR).
Up to October 19, “Macau noted GGR of MOP18.7 billion [US$2.3 billion] during the month, implying average daily revenue (ADR) of MOP984 million,” said a note from Credit Suisse AG issued in Hong Kong.
The investment bank estimated ADR of MOP829 million last week, down 15 percent year-on-year. “The trend is in-line with the normal seasonality as revenue tends to slow post Golden week holiday, but the year-on-year decline has narrowed from 30 percent decline in the first week of October,” said analysts Kenneth Fong and Isis Wong.
“We estimate October GGR to drop by 18 percent to 21 percent year-on-year to MOP28.9 billion to MOP29.5 billion, implying ADR of MOP850 million to MOP900 million for the rest of month,” added the Credit Suisse team.
Daiwa Capital Markets said October’s revenue is on track for a decline of 21 percent to 25 percent year-on-year. “Our research in the market suggests that general activity remains weak across all segments,” Daiwa analysts Jamie Soo and Adrian Chan wrote in a note on Tuesday.
The brokerage said market share levelled out amongst Sands China Ltd, SJM Holdings Ltd and Galaxy Entertainment Group Ltd at about 23 percent.
Cameron McKnight of Wells Fargo Securities LLC also expects a decline of at least 20 percent year-on-year in October. “The week-on-week decline was better than last year’s 15 percent decline in the second week post Golden Week, and the smoking ban seems to be a non-issue at the moment,” Mr McKnight said.
The new smoking regulation states that casino mass floors, including premium mass areas, have to be non-smoking since October 6.
“It is important to note that October 2013 is a tough compare as VIP, mass and total revenue grew [by] 28 percent, 45 percent [and] 32 percent, [respectively],” added Mr McKnight.
Analysts are predicting an over 30-percent drop in VIP revenue and flat growth for mass revenue in October.
If the final monthly tally confirms analysts’ prediction, it would mean five consecutive months of year-on-year decline for the city’s GGR. Macau casino GGR shrank 11.7 percent year-on-year in September, according to government data.
Such deceleration hasn’t been seen since the first two quarters of 2009, following the global financial crisis in the autumn of 2008. Then, gaming revenue fell 12.7 percent year-on-year in the first quarter 2009, and 12 percent in the second compared to the same period in 2008.
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”Many investors cite Golden Week as a catalyst to significant, sustainable visitation increases and a showcase for profitability for many casinos [in Macau]... However… we are concerned recovery estimates may again be pushed back”
Analyst at Roth Capital Partners