GGRAsia – Sterne Agee reduces its Macau yearly estimates

Sterne Agee reduces its Macau yearly estimates

Sep 09, 2015 Newsdesk Latest News, Macau, Top of the deck

Brokerage Sterne Agee CRT has reduced its performance estimates for casino gross gaming revenue (GGR) in Macau for full-year 2015 and calendar year 2016.

In a note on Tuesday, it revised upward the likely 2015 GGR decline by three percentage points, to -32 percent year-on-year, from a -29 percent estimate previously.

For 2016, it thinks Macau GGR will expand by 13 percent year-on-year, two percentage points fewer than its previous assessment of 15 percent annual growth.

The investment community as a whole needs to “massively cut” its estimates on what level of recovery can be achieved in the Macau casino market in 2016, said a note on September 1 from Karen Tang of Deutsche Bank AG in Hong Kong. She said the depreciation of China’s currency; the Chinese central government’s efforts to curb outbound capital flows; and the slump in China share markets had all provided fresh headwinds for Macau’s casino sector.

Sterne Agee CRT analyst David Bain acknowledged in a separate Monday note that Macau’s August numbers had been disappointing in the sense they had broken an earlier trend of monthly sequential easing of decline. August’s rate of year-on-year GGR decline of 35.5 percent was 1 percentage point higher than that seen in July.

But Mr Bain said in his Tuesday outlook summary: “’Less bad’ [is] likely accelerating near-term. While we forecast September GGR growth to end -29 percent to -35 percent year-on-year, we forecast October GGR to end at -25 percent year-on-year, November to end at -21 percent year-on-year, and December to improve to -8 percent year-on-year.”

Sterne Agee noted that Studio City, a new Macau resort 60-percent owned by Melco Crown Entertainment Ltd, and that opens on October 27 – shortly after China’s National Day celebrations on October 1 – could have some positive catalytic effect for the market.

Mr Bain wrote, referring secondly to Galaxy Entertainment Group Ltd, which opened its Galaxy Macau Phase 2 resort on Cotai on May 27: “We continue to believe Macau is a supply driven market, albeit longer-term. We believe Macau Studio City will have a deeper impact to the Macau market than Galaxy’s Phase 2 given it is a full new property with far more patron draws and ‘wow’ factors.”

But he added: “However, we note Macau Studio City may be going into a fun fight without a gun depending on final table allocations from the Macau government.” The latter reference was to how many new-to-market live gaming tables Studio City will be granted at launch, under Macau’s table cap system. Studio City’s allocation has not yet been announced by the government.