“Continued regulatory noise, GGR [gross gaming revenue] year-on-year deceleration and weaker sentiment of China consumers are not helping” investor attitudes regarding the Macau casino industry, says a note from Morgan Stanley Asia Ltd.
“Investor interest is subdued, mainly because of stock performance and noise around regulations and the recent clampdown on money exchanges,” said the Friday memo from Praveen Chaudhury and Gareth Leung, referring to unauthorised money exchange touts lingering in or around casinos.
They added, referring to the front-runner for the Chief Executive (CE) position in Macau, former chief judge Sam Hou Fai: “Recent comments by the CE aspirant regarding [economic] diversification and a clampdown on illegal money exchanges have hurt sentiment over the past two months, and investors are worried about fourth quarter 2024 (CE election, President Xi [Jinping] visit in December).”
The latter was a reference to the possibility that China’s leader will come to Macau in December to mark the 25th anniversary of Macau’s handover from Portuguese administration, to that of China. No announcement has been made by Beijing on that topic.
The Morgan Stanley memo was issued after a recent trip to Macau with several long-only investors from global funds, said the institution.
The institution observed that Macau is “not completely immune from weak China macro[economics]”.
“Our junket contact and some operators noted lower visit frequency from high-end gamblers. We also observed lower bet sizes while walking the junket VIP floor” in casinos, the analysts added.
The note said nonetheless that “strong fundamentals” remained in place for the sector, with Macau GGR in July and August “tracking better than the broader China consumer space”, a reference to consumer confidence on the Chinese mainland, the main feeder market for the Macau tourism sector.
Morgan Stanley observed, referring to the so-called October Golden Week holiday on the mainland encompassing China’s National Day on October 1: “October holiday bookings are robust.”
The director of the Macao Government Tourism Office (MGTO), Maria Helena de Senna Fernandes, mentioned in Sunday comments that her department was hopeful that the city could log 100,000 visitors per day for the October Golden Week period. This year, China’s State Council has designated the holiday as running from Tuesday October 1 to Monday October 7 inclusive.
Morgan Stanley also gave some commentary on the idea that next-door Hengqin – which recently saw some easing of visa conditions for mainlanders making trips via there to Macau – could become in effect a tourism dormitory for Macau, via new hotels and cheaper room prices.
The analysts said: “Companies noted minimal help/traffic from the Hengqin-Macau multiple entry visa.
“Hengqin could help Macau by providing cheaper hotel rooms. Yet, of the total approximately 7,000-room supply – accounting for approximately 15 percent of Macau total room supply – about 4,000 of them were with theme park” operations based on Hengqin.
Morgan Stanley added: “Furthermore, the multiple-entry feature is still limited to tourists travelling on a ‘group’ basis, i.e., at least two persons.”
