Macau VIP GGR growth okay politically: analysts
Macau casino gross gaming revenue (GGR) could expand by above-consensus levels in the second quarter, say several brokerages, citing channel checks and industry unofficial data.
Fitch Ratings Inc said in its latest global report on the outlook for the gaming industry, that the VIP gambling segment in Macau “continues to benefit from solid demand characteristics and a more healthy junket environment”.
“Customers are coming back with a better understanding of the post-corruption crackdown environment,” said Fitch analysts Alex Bumazhny, Colin Mansfield and Joseph Fontana as quoted by “All In: Global Gaming Handbook,” the sixth edition of the ratings agency’s gaming sector outlook summary.
Union Gaming Securities Inc stated in commentary following Macau’s April GGR numbers issued on May 1 by the city’s government, that when judging April’s near-28 percent growth to the first quarter’s 21 percent expansion, “we believe both mass and VIP participated in April’s acceleration”.
Union Gaming analyst Grant Govertsen wrote: “We are now forecasting second-quarter 2018 GGR to grow 22 percent, or 200 basis points higher than our previous estimate. This includes a May forecast of +18.7 percent and June of +20.0 percent.”
Fitch had noted in its 2018 outlook section on Macau that while it was estimating annual GGR growth at 14 percent – a deceleration from what had been seen so far – “our forecast reflects continued overall health in the market”.
The ratings agency stated: “The tightening in China’s housing market, a possible harbinger of VIP slowdown, has been in effect for a while but had no noticeable impact on VIP as of yet. Junket willingness to extend themselves is held in check at the moment thanks to self-discipline, consolidation and tighter government regulations.”
Union Gaming said in its Tuesday memo that “based on typical sequential growth patterns seen in previous years we remain confident in our 17 percent-plus forecast for the whole of 2018 and are biased to the upside at this point”.
JP Morgan Securities Asia Ltd wrote also in a Tuesday note it forecast Macau GGR to grow by 15 percent to 18 percent year-on-year in May reflecting “tougher comps, particularly for VIP”, followed by 17 percent to 19 percent in June.
“This implies GGR can grow 20 percent to 21 percent year-on-year in the second quarter… suggesting good upside risk to our current assumption of +18 percent for the second quarter,” wrote analysts DS Kim and Sean Zhuang.
Deutsche Bank Securities Inc analysts Carlo Santarelli and Danny Valoy said in a Tuesday memo that the “the magnitude of the beat” stemming from April’s near 28 percent GGR expansion – a total of 890 bps above the brokerage’s pre-month forecast of 18.7 percent – might “bode well for investor sentiment around second-quarter 2018 property level consensus EBITDA [earnings before interest, taxation, depreciation and amortisation] forecasts”.
“On account of the upside to our April forecast, our second quarter 2018 GGR forecast goes to +21.5 percent from +15.3 percent, while our 2018 forecast goes to +14.9 percent from +12.4 percent,” said the Deutsche Bank team.
Morgan Stanley Asia Ltd noted that consensus estimates were for Macau GGR to expand by 16 percent year-on-year in the second quarter. But analysts Praveen Choudhary and Jeremy An noted Macau casino gambling demand in June “could be weak due to World Cup soccer games”.
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