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.
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Adjusted EBITDA reported by Macau casino operator Galaxy Entertainment for the fourth quarter of 2020