Gaming spend per visitor in Macau has started to rise, says a note from Karen Tang of Deutsche Bank AG, citing “extensive interviews” over the past two weeks with casino service staff and hosts at premium mass gambling areas in the city’s casinos.
“We conclude that Macau is now at the start of a mass-led GGR [gross gaming revenue] recovery,” she wrote in a Thursday note.
In August, Macau’s aggregate monthly gaming revenue tally – meaning VIP and mass combined – rose 1.1 percent year-on-year. The monthly result marked the first time in 27 months that such revenue had not contracted, judged year-on-year. August was buoyed – said some investment analysts, citing unofficial figures – by the mass segment. The local regulator only gives the split between VIP and mass revenue on a quarterly basis.
On September 3, Macau’s Secretary for Economy and Finance, Lionel Leong Vai Tac, issued some words of caution regarding whether the August result marked the start of a trend of improvement in monthly aggregate GGR, observing that in the month of September, Macau GGR was often seasonally weaker than that of the month of August.
Nonetheless, Deutsche Bank’s Ms Tang estimates that mass-market GGR growth will accelerate to “low teens” of percent year-on-year in 2017, because of some positive structural changes in the local gambling consumer market, that the bank thinks will help push up spend per mass player.
“We forecast that mass GGR growth will accelerate from 4 percent year-on-year in second quarter 2016, to 10 percent year-on-year in the second half 2016 and to 12 percent year-on-year in 2017,” stated Ms Tang.
“As mass has higher margins, we lift our sector EBITDA [earnings before interest, taxation, depreciation and amortisation] by 10 percent to US$6.6 billion for 2017,” she added.
Ms Tang said that in the second quarter, Macau’s mass-market GGR was up 4 percent year-on-year, even though visitor numbers for the period were down 0.5 percent.
The local regulator, the Gaming Inspection and Coordination Bureau, had reported mass-market table baccarat GGR as only having grown by 0.2 percent in the second quarter. Baccarat is the main game in Macau’s casino sector.
Brokerage Union Gaming Securities Asia Ltd said in a note in late August that mass-market table GGR would have expanded by 4.4 percent year-on-year in the second quarter, were it not for the effects of so-called “table reclassification”. This is where some Macau operators label the upper end of some of their mass-market operations as “VIP” in order that patrons can smoke at the table.
Ms Tang said in her latest note, referring to second-quarter data on the structure of the visitor market: “Importantly, Chinese visitors are converting from day-trippers (-8 percent year-on-year) to overnighters (+11 percent year-on-year). In June, for the first time, overnighters outnumbered day-trippers. Longer stay means more play.”
Deutsche Bank said its proprietary research on Macau table count indicated the proportion of the city’s baccarat tables with minimum bets of more than HKD2,000 [US$258], rose from 29 percent of the mass floor in December to 36 percent by July, “with the minimum bet rising prominently since July”.
Ms Tang added: “We believe this player conversion can sustain premium mass growth for the next one to two years.”
Proprietary research by brokerage CIMB Securities Ltd, published last week, indicated the proportion of Macau mass-market gaming tables offering minimum bets of HKD2,000 and above during August was the highest in the market for 11 months.
Analyst Christopher Jones of the Buckingham Research Group, said in a note last week following the August GGR data, that average per capita gaming spend per day probably increased by 1.1 percent year-on-year in August. He added that would mark the first such increase since May 2014, excluding Chinese New Year 2015.
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"The [Macau] government has a lead in this subject in regards to what should be done after the [gaming] concessions expire. We will be first listening to what the government will say”
Ambrose So Shu Fai
Vice-chairman and chief executive at Macau casino operator SJM Holdings