Mass-market gambling contributed more than half of Macau’s December casino gross gaming revenue (GGR), says a note from brokerage Sanford C. Bernstein Ltd in Hong Kong, quoting unofficial industry returns.
The city’s government only gives the split between VIP baccarat GGR and mass-market GGR on a quarterly basis, some time after the end of each reporting quarter. In the three months to September 30, VIP revenue accounted for 53 percent of all Macau casino revenue – a reduction from the boom years of the VIP segment when it provided 60 percent plus of the city’s annual GGR.
“In December, mass GGR accounted for approximately 52 percent of the market GGR,” said the brokerage in a note on Wednesday. It added the figure was based on “[Sanford] Bernstein adjustments”.
The institution stated those adjustments sought to “rectify the distortion caused by the smoking-related reclassification of premium mass [gambling] and for other reporting shifts by certain operators”.
Other investment analysts have noted that Macau’s gaming regulator doesn’t define VIP gambling in terms of whether there is a rolling chip programme in operation (the standard industry definition) but rather on the size of table minimum bets and maximum payouts. Smoking is currently still allowed in Macau gaming areas designated as VIP rooms. So for an operator to define a premium mass zone as “VIP” creates the possibility of the operator retaining smoking there, provided that the area is physically separate from the rest of the casino floor.
Sanford Bernstein said Macau’s adjusted VIP GGR for December was estimated to have declined by 35 percent year-on-year to MOP8.8 billion (US$1.1 billion) on junket rolling chip volume falling 41 percent year-on-year; but the VIP GGR figure was up 13 percent judged month-on-month.
“We see no near-term recovery in VIP principally due to continuation of the anti-corruption campaign [in mainland China] and junkets being liquidity constrained, with China’s increased oversight of underground banking and Macau government expected to introduce tightened regulation over junket activities,” said analysts Vitaly Umansky, Simon Zhang and Bo Wen.
Sanford Bernstein added that the recently publicised news of another alleged Macau junket fraud – reported to the Judiciary Police on Sunday – “may accelerate the government’s plans to potentially introduce greater junket regulation”.
In a commentary on other headwinds facing Macau, Union Gaming Securities Asia Ltd said in a note on Wednesday that a report – suggesting the value of detected transactions in Macau using alleged unregistered China UnionPay Co Ltd handheld terminals amounted to MOP1.22 billion in 2015 – represented “notably less than 1 percent” of Macau annual GGR.
“We do not buy into the doom and gloom scenario that there will be a wholesale stoppage of UnionPay as a means to get cash while in Macau. Regardless, we ran the numbers again and believe that the high-end of UnionPay risk is probably less than 2 percent to GGR and less than 3 percent to EBITDA [earnings before interest, taxation, depreciation and amortisation],” said Union Gaming Securities Asia analyst Grant Govertsen in a note on Wednesday.
Market share
Sanford Bernstein meanwhile estimated that Macau’s mass market GGR for December totalled MOP9.5 billion (versus November’s MOP8.6 billion), declining by 3 percent year-on-year and improving sequentially by 11 percent.
Macau’s total GGR for December fell by 21.2 percent year-on-year to approximately MOP18.34 billion. As had been widely predicted by investment analysts, it was the 19th straight month of GGR retreat measured year-on-year.
Sanford Bernstein said that among Macau’s six casino operators, Sands China Ltd gained the most market share of total GGR in December judged sequentially – up 2.1 percentage points to 23.7 percent – “as it benefited from increased visitor arrivals over the holiday season”.
The brokerage added that Galaxy Entertainment Group Ltd also expanded its market share month-on-month (up 1.3 percentage points to 23.1 percent), “largely due to better performance in VIP at both Galaxy Macau and StarWorld” casino properties.
SJM Holdings Ltd lost 1.5 percentage points of share in December, with 20.3 percent of the market, “driven by weakness in both VIP rolling chip volume and mass”.
Melco Crown Entertainment Ltd lost 0.4 percentage points, to end December on 16.2 percent, “on VIP weakness”.
Wynn Macau Ltd gained 0.4 percentage points to 9.1 percent, “on premium mass improvement”.
MGM China Holdings Ltd saw a 1.9 percentage points decline in share, to 7.5 percent, due mainly to “poor VIP hold”, said Sanford Bernstein.
