Analysts at Nomura’s Instinet LLC said in a Thursday memo there was still a question mark regarding whether China had yet moved to “normalise” travel restrictions for mainland residents wishing to visit to Macau. Certain restrictions on visas to Macau for mainland-based tourists had reportedly been put in place from late November ahead of a December visit to the city by China’s leader, President Xi Jinping.
“We believe the issue is transitory, but operators we chatted with in the last several days weren’t dazzled by demand over the New Year,” Nomura’s Harry Curtis, Daniel Adam and Brian Dobson noted in a Thursday memo.
Macau had an aggregate of circa 39.4 million tourism arrivals for full-year 2019, an approximately 10-percent rise from 2018, according to data released by the city’s Public Security Police on Wednesday. But a number of investment analysts has said that headline visitor numbers to Macau need not be positively correlated to overall gaming demand, as gross gaming revenue (GGR) in the Macau market has been typically skewed to high-end play.
Nomura’s analysts stressed in their Thursday note, that their overall outlook for the Macau casino sector in 2020 was “unchanged”.
“We expect continued year-on-year contraction in VIP GGR through first half 2020, followed by flat to low-single-digit growth in the second half,” they stated.
“Mass growth should lift 15 percent in the first quarter, followed by low-double-digit quarterly growth thereafter,” the Nomura team further noted.
The brokerage said that December’s reported 13.7 percent GGR decline “was about 370 basis points below the latest consensus estimate of -10 percent, but is less of a surprise, given the travel/visa restrictions put in place during [President] Xi’s visit, as well as the ongoing pressure on demand from the Hong Kong protests.”
A number of analysts had been predicting for several weeks that the December numbers would suffer relative to a year earlier. Factors included: the effects of a tough comparison with December 2018, when casino GGR rose 16.6 percent year-on-year; ongoing protests in Hong Kong, that might have put off some mainland Chinese from making two-city tours; and visa and security restrictions reportedly put in place in Macau for the three-day visit to the city of President Xi, from December 18 to 20.
The December GGR performance contributed to push Macau to a 3.4 percent contraction in calendar-year 2019 casino GGR.
December GGR’s “weak print was very well expected: consensus was -15 percent year-on-year,” noted analysts DS Kim, Derek Choi and Jeremy An, of JP Morgan Securities (Asia Pacific) Ltd in a Thursday memo.
But they added it was “unlikely to move the needle for forecasts and sentiment”.
Average daily revenue for December “came in at MOP737 million [US$91.9 million] which is weak but understandable given various travel restrictions and controls around the well-publicised visit by President Xi.”
JP Morgan forecast January GGR would fall by 2 percent to 4 percent year-on-year, with some “positive impact” from the fact Chinese New Year – a lunar festival – would fall in January this time, rather than February. The brokerage expected February GGR to fall by 4 percent to 6 percent year-on-year, with some negative impact from the fact that the Chinese New Year holiday would be in January this time instead of February as in 2019, but that would be partially offset by February 2020 having an extra day due to a leap year.
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