Investors in the Macau gaming sector should “mute out” what a bank terms the “data noise” regarding visitor volume to the city.
Macau’s mass-segment casino gross gaming revenue (GGR) had been “recovering well ahead” of market expectations since the lifting of pandemic-related restrictions in January, noted Citigroup analysts George Choi and Ryan Cheung in a Tuesday memo.
They raised the institution’s estimates for full-year 2023 GGR in Macau by 13 percent, to MOP179.4 billion (US$22.25 billion) or about 61 percent of pre-pandemic trading levels in 2019.
But they added that “investor confidence” in Macau’s “recovery trajectory” regarding earnings before interest, taxation, depreciation and amortisation (EBITDA) “seems impacted by the relatively slow visitation recovery to date”.
On Monday the Macau government had said the city’s visitor tally in May was down 2.6 percent compared to April, at just over 2.21 million.
“Our research work shows that the visitation data are being tainted by the slow recovery in the usually lower-value group tour visitors,” wrote the Citigroup analysts. They suggested that data regarding “higher-value” hotel guests, as well as the “more concrete approximately 90-percent mass GGR recovery” relative to pre-pandemic trading in 2019, were more useful indicators.
Citigroup said “scrutiny of the latest visitation data shows that recovery in hotel guests – usually a good proxy for high-value players – is already at 96 percent” of pre-pandemic.
Its analysts added: “It is the slow – approximately 11 percent – recovery in group tour visitors, mostly lower-wagering players, that is dragging the overall visitation recovery run rate.”
A factor there, suggested Citigroup, was a shrinkage in the network of Macau-based travel agencies able to coordinate group tours, after some closed down during the three years of pandemic restrictions.
The Citigroup team also observed, hinting first at the mainland China macroeconomic outlook and referring secondly to exit visa issuance by the mainland authorities for its residents to come to Macau: “The slow recovery does not seem to be a demand or visa issue.”
The banking group also made reference to the potential positive impact on gaming demand of recent and upcoming casino resort-staged concerts – a topic discussed also by JP Morgan Securities (Asia Pacific) Ltd – and the likely boost from launches of new hotel space at Cotai properties Galaxy Macau, Studio City, and Grand Lisboa Palace.
The concerts so far held had been “driving incremental visitation to Macau and playing a vital role in the solid second-quarter 2023 GGR recovery,” suggested Citigroup.
“We expect concerts in the second half 2023, including the well-advertised Cantopop star Aaron Kwok resident concert series at Studio City and the Tencent Music Entertainment Awards 2023 in Galaxy Arena, to draw more high-value visitors.”
