Based on numbers released for the third-quarter earnings of Macau’s six gaming operators, VIP casino gross gaming revenue (GGR) accounted for only 44 percent of the gambling market in that period, suggested a Thursday note from Union Gaming Securities Asia Ltd.
The brokerage described that as the “lowest mix ever,” relative to market revenue generated by mass segment play.
According to the official market data issued by the local casino regulator, the Gaming Inspection and Coordination Bureau – also known by its Portuguese acronym DICJ – VIP baccarat GGR in the three months to September 30 represented 52 percent of all the GGR generated by casino games.
“The DICJ quarterly numbers no longer paint an accurate picture due to table reclassifications,” said Union Gaming analyst Grant Govertsen.
During the past two years several brokerages have given commentary on the phenomenon of “table reclassification” in Macau by casino operators there. Japanese brokerage Nomura discussed the topic in a November 2014 memo. Union Gaming has broached the topic on many occasions, including in a report in August this year.
Analysts have said table reclassification – done at operator level and not necessarily tallying with the gaming bureau’s own system of table classification – tends to lead to an overweight number in official measurements of VIP GGR, and an underweight one for mass-market play.
Analysts have also highlighted that reclassification has come about because of Macau’s rules on in-casino smoking. If an area is classified as for VIP play, smoking at the table is commonly permitted; in mass gaming areas it is not.
But as currently in Macau a VIP gambling area is defined not by whether there is a rolling chip programme on the play, but on whether an area is physically separate from the main floor, some Macau operators have chosen to locate high-stakes mass-market gambling in areas separate from the main floor and call the area “VIP”. This is on the basis that managements believe that if players are allowed to smoke at the table, they are likely to gamble more, and more consistently, than if they have to get up and go outside.
According to official gaming bureau data, Macau’s mass-market segment casino GGR – including from slot machines and live multi game electronic tables – expanded by 3.9 percent year-on-year in the third quarter of 2016.
Union Gaming said in its latest note that – when taking into account the operators’ reported numbers for the period – mass-market gambling in fact expanded by 11 percent year-on-year.
The brokerage said the quarterly numbers are likely to have benefited from new supply. Wynn Palace resort, developed by Macau casino operator Wynn Macau Ltd, opened on August 22. The Parisian Macao resort, from Macau casino firm Sands China Ltd, opened on September 13.
“Data reported by Macau’s Big Six operators shows that mass market tables [revenue] actually grew 11 percent year-on-year in third quarter 2016… This is important as it shows mass turning the corner,” wrote Mr Govertsen.
“Within the 11 percent mass table growth during the third quarter 2016, we believe premium mass is also seeing growth; further, we think VIP could be on the cusp of returning to growth (although our estimates remain more cautious on VIP for a variety of reasons),” he added.
Galaxy Entertainment Group Ltd and SJM Holdings Ltd respectively issue only unaudited selected highlights of third-quarter operating numbers. Those operators publish their audited results on a half-yearly basis, as per the requirements under Hong Kong Stock Exchange rules.
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"Given the opaque nature of the VIP segment (56 percent of gross gaming revenue in first quarter 2017), forecasting Macau GGR with a fair amount of certainty is difficult; therefore, we remain cautious"