The wide miss of Macau’s January casino gross gaming revenue (GGR) compared to market estimates has seen investment analysts searching for answers.
Casino GGR in Macau rose by 3.1 percent year-on-year in January to MOP19.26 billion (US$2.41 billion), according to data from the city’s Gaming Inspection and Coordination Bureau released on Wednesday.
Several investment analysts had estimated in respective notes issued prior to the official announcement that January’s GGR expansion would be in the range of 7 percent to 10 percent year-on-year.
“Given back half 2017 comparisons get more difficult, we believe a January/February aggregate result that comes in below 9.0 percent [year-on-year growth] will likely spur revisions lower,” said a Wednesday memo from analysts Carlo Santarelli and Danny Valoy of Deutsche Bank Securities Inc.
Macau’s January GGR was “well below [our] and consensus expectations (8 percent to 9 percent), and will certainly weigh on the group [of casino operators],” said a note the same day from analyst Christopher Jones of the Buckingham Research Group Inc.
But he added: “All is not lost, as at least some of the weakness can be attributed to items other than lack of demand.”
The other items referred to by Mr Jones included: a sharper than expected slowdown in demand prior to the Chinese New Year which fell on January 28 this year; and low hold by the house on VIP gambling in some casinos, combined with a slow start to VIP gambling during the Chinese New Year holiday season.
“This isn’t unusual, as back in the boom days VIP players would tend to avoid the busy days, only to arrive as the masses start to clear out,” wrote Mr Jones.
Golden Week tourists
Macau recorded a total of 770,024 tourist arrivals – a year-on-year increase of 6.7 percent – in the six days from January 27 to February 1 inclusive, according to data compiled by the Macao Government Tourism Office. According to the tourism bureau, the average rate of year-on-year growth in arrivals picked up in the latter part of the festive period, which is also sometimes referred to as ‘Chinese New Year Golden Week’.
“Based on the conversations we’ve had with junkets over the last few days, we understand that many didn’t see any meaningful volumes until January 30. As such, there was little VIP contribution to the January numbers,” said a Wednesday note from analyst Grant Govertsen of brokerage Union Gaming Securities Asia Ltd.
“Visitation is only a proxy for gaming revenues and not always a good one. However, it does suggest that Chinese New Year got off to a late start,” wrote Buckingham Research’s Mr Jones.
“January’s 3 percent year-on-year [GGR] growth represents the sixth consecutive month of growth but the number itself is still well below our expectation,” stated Vitaly Umansky, Zhen Gong and Yang Xie of brokerage Sanford C. Bernstein Ltd.
JP Morgan Securities Asia Ltd analysts DS Kim and Sean Zhuang said in a Wednesday note – referring to unofficial industry data on casino GGR for the first five days of February due to be provided by what it termed “industry consultants”: “This data should provide good insight on the depth and healthiness of current demand, as it will cover holiday peak days (important for mass) and some post-Chinese New Year tail-end demand for VIPs.”
Brokerage Daiwa Securities Group Inc appeared to downplay in a Wednesday note the prospects for early February.
“Patron sentiment also appears to have deteriorated as we head into this peak season, as a material portion of hotel rooms previously pre-booked were released and made available again for booking,” suggested Daiwa analysts Jamie Soo, Adrian Chan and Jennifer Wu.
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"After a challenging period, the Macau market is growing again, and its growth rate has been accelerating for three consecutive quarters. Our Macau operation is experiencing strong growth in both our mass gaming and non-gaming segments"
Chairman of gaming operator Las Vegas Sands and subsidiary Sands China