GGRAsia – Macau to see little to no rebound after CNY: Nomura

Macau to see little to no rebound after CNY: Nomura

Feb 17, 2015 Newsdesk Latest News, Macau, Top of the deck

Average daily revenue in Macau casinos is showing a sequential decline “typical” before Chinese New Year, which this year falls on February 19, said a new note from Japanese finance house Nomura.

According to Nomura’s estimates, Macau’s daily gross gaming revenue (GGR) was MOP583 million (US$73 million) for the second week of February.

“The sequential decline is typical before Chinese New Year (February 19-26), but our concern is that post CNY, there will be little to no rebound,” said the Nomura analysts, led by Harry Curtis.

“For Chinese New Year, we expect muted results because high-end players (both VIP and premium mass) remain either cautious or less liquid due to lower credit availability among junkets, heightened UnionPay scrutiny and restrictive transit visa policies,” they added.

Nomura estimates that February’s GGR could be down between 39.5 percent to 43 percent year-on-year, to between MOP21.7 billion and MOP23 billion.

“Our assumption of two weeks at about MOP900 million could be aggressive, in which case a decline of 45 percent to 50 percent is possible for February,” said the Nomura research team.

Kenneth Fong and Isis Wong of Credit Suisse AG said that for a clearer picture of year-on-year GGR trend for the Chinese New Year period it is better to analyse the combined January and February revenue tallies. In 2014, the Chinese New Year was on January 31.

“Combining January and February GGR together to observe the real underlying trend factoring in the timing shift of Chinese New Year holiday, we estimate GGR may drop [about] 33 percent year-on-year, worse than December 2014’s drop of 30 percent year-on-year,” said the Credit Suisse team.

In March, the gaming revenue trend “is likely to be weak amid another round of VIP rooms closure” after the holiday period, they added.

In Monday’s note, Nomura’s analysts said they see even greater risks for the Macau gaming industry, such as “more intense anti-corruption actions, junkets winding down, a probable full smoking ban in 2015/2016 and lower-than-expected table allocation”.

The brokerage last month lowered its projected rates of return on invested capital for the upcoming Cotai casino resorts in Macau. The Japanese finance house now expects Macau GGR for full-2015 to drop 19.8 percent year-on-year .