Analysts at Wells Fargo Securities LLC are not expecting year-on-year growth in VIP gross gaming revenue (GGR) in Macau casinos to resume before mid-2015 due to the poor credit outlook in mainland China.
“We believe slowing credit growth is meaningfully impacting the Chinese economy,” analysts Cameron McKnight and Rich Cummings wrote on a note issued on Friday. “Given the current credit outlook, we do not expect VIP growth to resume until mid-2015,” they added.
Mr McKnight and Mr Cummings stated that Beijing’s increasing anti-corruption drive and transit visa changes have also “had a negative impact” on gaming revenue in Macau.
Fitch Ratings Inc said last week: “The VIP segment has been pressured recently by tightening of junket credit and the corruption crackdown on the mainland.”
The ratings agency added that these pressures are likely “temporary”. It expects VIP to turn back positive in early 2015 “as year-on-year comparisons get easier and as the mentioned pressures subside, although the exact timing is hard to handicap”.
Tightening of credit and the corruption crackdown may also have some impact on premium mass-market revenue, Wells Fargo analysts noted. “We also believe the premium business is more subject to macro trends and policy changes, which likely means sequentially flat revenue trends until supply growth picks up in 2015,” they wrote.
The investment bank is forecasting GGR to drop by about 9 percent year-on-year in September based on initial reads.
GGR for August fell by 6.1 percent year-on-year to MOP28.9 billion (US$3.6 billion), the city’s Gaming Inspection and Coordination Bureau said.
It was the first time in more than five years that monthly casino GGR fell in year-on-year terms for three consecutive months. It dropped by 3.7 percent in June, followed by a 3.6 percent decrease in July.
Japanese finance house Nomura said last week it expects GGR to fall by 6 percent to 10 percent year-on-year in September if business in the first week of the month is any guide.
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"Competition is tough in Macau and is also changing. It [the local market] is susceptible to a lot of macro factors”
Daisy Ho Chiu Fung
Chairman of casino operator SJM Holdings Ltd