Macau VIP GGR slower since December: Credit Suisse
Macau VIP gross gaming revenue (GGR) growth has slowed since mid-December, says a Monday memo from investment bank Credit Suisse AG, noting that the high roller trade typically accounts for 30 percent of casino operator earnings before interest, taxation, depreciation and amortisation (EBITDA).
“Suncity has seen volume growth decelerate from +30 percent in October-November-early December, to +15 percent in the second half of December and -10 percent so far,” said the memo from analysts Kenneth Fong and Lok Kan Chan, referring latterly to the first seven days of this month. Suncity Group is described by market commentators as the largest single investor in Macau junket sector promotion work.
“The junket agents attribute the falling volume to fewer top VIP players and some decline in the average spent,” stated the Credit Suisse team.
Various reasons included “players preserving cash ahead of the Chinese New Year as a result of the tight China liquidity condition…; change of travel pattern and more players travelling overseas during the long holiday; and players taking a break after a few strong months,” it said.
“The agents saw a slowdown in gambling debt repayment for a small group of big players,” the institution further noted.
Regarding the wider outlook for the VIP trade, the Credit Suisse analysts noted: “We believe that it is still too early to draw a conclusion based on a few weeks of data as the VIP segment itself is volatile in nature.”
“Currently, we do not notice any external shocks or junket system issues which have historically led to rapid VIP deceleration,” they added.
The bank estimated aggregate Macau GGR – including mass-market play – for the first seven days of January was MOP5.3 billion (US$657.8 million), down 7 percent to 8 percent judged year-on-year, but the market was still on track for a GGR monthly tally up 18 percent from the prior-year period.
Japanese brokerage Nomura said in a Monday note it expected daily casino GGR flow for January to be “bouncing around” in the run up to Chinese New Year, but could still generate a monthly tally up 20 percent year-on-year.
“We do not expect the pre-Chinese New Year lull that negatively impacted GGR in late January 2017 to repeat this month,” wrote the Nomura analysts, noting that Chinese New Year falls later in the first quarter – February 16 – than in 2017, when it fell on January 28.
Brokerage Sanford C. Bernstein Ltd said in a Monday note that for the first seven days of January, VIP GGR was likely up by a “low single digit” percentage compared to the same period in December, with the mass segment “likely marginally down” compared to the prior-month equivalent.
“Assuming a GGR average daily rate of MOP690 million to MOP710 million for the remaining days of the month, we estimate January GGR in a range of MOP21.9 billion and MOP22.3 billion, an estimated year-on-year increase of +14 percent to +16 percent, which is in line with our previous estimates,” wrote Sanford Bernstein analysts Vitaly Umansky, Zhen Gong and Cathy Huang.
The brokerage had flagged in September last year that Macau VIP gambling spend might moderate in the fourth quarter of 2017 – driven by factors including the anti-graft campaign in mainland China and tightening liquidity in China’s economy.
Analysts have said there can be as much as a six-month lag between fluctuations in credit availability in China and effects being felt in the Macau VIP gambling market.
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