The year-on-year second-quarter decline in Macau VIP gross gaming revenue (GGR) and the improvement in the mass-market segment were respectively overstated due to the lingering effects of so-called “table reclassification”, said several brokerages in Tuesday notes.
That day the local regulator had issued the official data on the quarterly split between VIP baccarat GGR and the mass-market sort.
Macau VIP baccarat GGR was stated to have fallen 15.6 percent year-on-year in the second quarter, while 18.6-percent growth was recorded for GGR in the mass segment – inclusive of slot machine revenue. That was according to the city’s regulator, the Gaming Inspection and Coordination Bureau, a body also known as DICJ.
But Carlo Santarelli of Deutsche Bank Securities Inc said in a note after the information was revealed: “Reclassification activity post the full smoking ban will have a favourable effect on year-over-year mass growth rates and a conversely unfavourable effect on year-over-year VIP growth rates.”
That was a reference to a cessation to tableside smoking in Macau casinos – a process completed in January this year when such tobacco use was ended at high-roller tables.
Investment analysts had noted that prior to January 1 this year, some mass-market gaming areas at Macau casinos had been classified as “VIP”, and that tableside smoking by patrons had been permitted in some of those areas.
Praveen Choudhary of Morgan Stanley Asia Ltd said in a Tuesday memo that the “quantum of growth” reported for second-quarter mass GGR, at 18.6 percent, was “not accurate due to reclassification”.
The analyst stated: “In first-quarter 2019, the difference between VIP revenue reported by DICJ and the six companies [Macau operators] was MOP5.5 billion [US$683.5 million].”
He added: “We estimate the difference in second-quarter 2019 is MOP5 billion given the smoking ban, implying the adjusted VIP revenue growth would be -14 percent and mass growth +11 percent year-on-year…”
Mr Choudhary said that “other interesting details disclosed” in the DICJ numbers included the fact the Macau industry added 110 tables to its active roster and 516 slots in the second quarter, “roughly 2 percent up year-on-year,” respectively.
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”The Macau government is not aiming to trivialise or drive out the junket sector, but to regulate the sector so that it would not hurt Macau’s reputation”
Alvin Chau Cheok Wa
Chief executive of privately-held VIP junket business Suncity Group