Casino gross gaming revenue (GGR) in Macau for October is likely at best to be down 3 percent judged year-on-year, and at worst, down by 6 percent compared to a year earlier. That is the scenario presented overall by two brokerages in memos to investors in Macau gaming stocks.
A Tuesday note published by JP Morgan Securities (Asia Pacific) Ltd suggested that Macau’s October GGR would “decline 3 percent, followed by a decline of 6 percent to 8 percent in November/December, implying fourth quarter GGR to fall 6 percent year-on-year.”
Analysts DS Kim, Jeremy An and Derek Choi added: “Meanwhile there’s a good possibility that 2019 marks a cyclical bottom, and that demand can rebound into 2020 on easy comps, better liquidity in China, and alleviation of 2019 headwinds (namely VIP smoking ban, junket noise, Hong Kong social unrest, capital control, among others).”
Hong Kong has been affected by months of street protests aimed mostly against the local government there. Several brokerages have said the social unrest in the city has caused some transport disruption and created headwinds to visitor arrivals to Hong Kong and onward into Macau.
Macau GGR rose 0.6 percent year-on-year in September, according to data released on Tuesday by the city’s regulator, the Gaming Inspection and Coordination Bureau. The body – also known as DICJ – said such GGR was MOP22.08 billion (US$2.73 billion) for the month, compared to MOP21.95 billion in the prior-year period.
September’s result meant that the aggregate of Macau casino GGR for the nine months to September 30 stood at MOP220.30 billion, a contraction of 1.7 percent year-on-year.
JP Morgan’s team stated in their Tuesday note that Macau’s GGR September results were “unexciting, though not unexpected”.
The brokerage added: “Average daily revenue came in at MOP736 million/day, the lowest level in nearly two years (if we exclude last September which was hurt by a super typhoon)”.
September 2018 saw the precautionary closure of Macau casino operations for a period slightly greater than 24 hours, due to Typhoon Mangkhut.
JP Morgan stated in its Tuesday note that mass gaming results in Macau for September were “a bit softer than we would have liked… We would like to think this is a blip given the impact from Hong Kong SAR social unrest and renminbi devaluation; nonetheless, the trend is bit concerning and definitely worth monitoring.”
Sanford C. Bernstein Ltd said – also in a Tuesday note – that “Macau September GGR came in line with reduced expectations.”
Sanford Bernstein analysts Vitaly Umansky, Eunice Lee and Kelsey Zhu wrote in their note that their preliminary GGR estimates for October pointed to a year-on-year decline of between 3 percent and 6 percent.
The Sanford Bernstein team added: “With the Golden week leading off the month, the trend so far is not looking too optimistic based on our recent conversations with industry participants in Macau. While hotel bookings are solid, we expect the quality of the customers will be lower (i.e., lower spend per head) this year. Room comps will be high during the period, but likely go to an average lower spend customer than in 2018. Consequently, higher-end play will likely remain tepid during Golden Week and during the whole of October.”
China’s State Council declared October 1 to October 7 as this year’s National Day holiday period, also known as National Day Golden Week. This is usually a peak season for the city’s tourism and casino industries as hundreds of thousands of mainland Chinese tourists take advantage of the weeklong break to visit Macau.
There is however no direct correlation between overall tourism arrivals and casino GGR in Macau, according to investment analysts, who have said that is because GGR in the Macau market has been typically skewed to high-end play.
Visitor arrivals to Macau during China’s National Day – the first day of the National Day Golden Week – were up by 3.8 percent from a year earlier, according to preliminary figures from the city’s Public Security Police.
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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