The reason for Macau’s casino gross gaming revenue (GGR) falling 3.7 percent in June – the first such monthly year-on-year drop since June 2009 by GGRAsia’s calculations – is probably because growth in the VIP segment is lagging, says a research house.
“We believe that the VIP segment likely tracked down about 20 percent year-on-year in June, while mass market continued to track at around a steady +30 percent rate,” Union Gaming Research Macau Ltd wrote in a note.
Macau’s casino GGR for June reached MOP27.22 billion (US$3.41 billion), down from MOP28.3 billion a year earlier, according to official data.
Since 2009, Macau casinos have tripled annual GGR, from about MOP120 billion to MOP360 billion in 2013.
On Tuesday, Macau’s Secretary for Economy and Finance, Francis Tam Pak Yuen, said the 2014 FIFA World Cup in Brazil had been a factor contributing to the decrease of GGR in June. The month-long tournament started on June 12 and it ends on July 13.
Mr Tam however said it is too early to make any assumptions on future trends, adding that the market shouldn’t be judged based on just one month’s figures.
“The year-on-year GGR comp [for June] was tough at +21.1 percent, while the calendar comp was also unfavourable with one fewer Saturday,” Union Gaming said.
“We continue to believe that the VIP slowdown is largely political (e.g. anti-corruption) in nature, rather than economic or even event-driven (e.g. World Cup, although this could be responsible for a few hundred basis points of the VIP decline),” said the research house.
It added: “We would expect to see VIP continue to be soft over the near-term, and would not be surprised to see overall GGR to continue to decline in the low/mid-single digits through the summer.”
Several analysts have said they expect a pick up in performance in the second half of 2014. “The worst is almost over,” Deutsche Bank gaming analyst Karen Tang said in a note before the figures were published.
Union Gaming said it doesn’t believe that a prolonged weak VIP story is necessarily built in to consensus. “Our recent conversations with investors have suggested a forming consensus of a flat-to-down-slightly VIP story over the coming months,” it said.
Analysts at UBS AG said they expect revenue growth to resume in the third quarter with the mass segment entering the strong summer months and “some stabilisation in VIP volumes”.
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Analysts at Sanford C. Bernstein