GGRAsia – Macau VIP revenue may drop by up to 10 pct in June: Nomura

Macau VIP revenue may drop by up to 10 pct in June: Nomura

Jun 10, 2014 Newsdesk Latest News, Macau, Top of the deck

Nomura estimates that VIP gross gaming revenue (GGR) of Macau’s casinos may go down by 6 percent to 10 percent in June in comparison with one year before. The forecast is based on market checks and a tough VIP win rate year-on-year comparison.

“The World Cup starts in mid-June and major football championships have historically appeared to impact the monthly VIP roll, which could limit potential for upside surprise,” analysts Louise Cheung and Harry Curtis added in a note issued on Monday.

The Japanese brokerage firm said mass-market GGR “remains strong” and could increase by 34 percent to 38 percent in June.

Nomura reported average daily table win run rate for the first eight days of June was MOP973 million (US$121.9 million) versus May’s MOP972 million, which included the Labour Day holiday period. The firm estimated that June GGR could stand at between MOP29 billion and MOP30 billion, up by 3 percent to 7 percent on year-on-year terms.

Ms Cheung and Mr Curtis flagged the lack of near-term catalysts to push up stock prices of Macau-related gaming stocks, which have been heading down for much of the year to date, especially so far this month. “We believe any potential sustainable rally may not occur until late Q3’14,” they wrote.

Morgan Stanley says Macau’s casino sector may even post a quarterly decline in earnings before interest, taxation, depreciation and amortisation (EBITDA) this quarter. It would be the first time since the fourth quarter of 2009, the investment bank said in a note issued on Monday.

Morgan Stanley expects the sector’s EBITDA to decline by 4 percent quarter-on-quarter for the three months ended June 31. But EBITDA will still be up 21 percent on year-on-year terms.

Several analysts are lowering their 2014 forecasts for the Macau casino industry and revising ratings and price targets for stocks of Macau-related gaming firms.

Deutsche Bank lowered on Monday its full-year growth estimate for the city’s casino GGR from 15 percent to 12 percent. It also downgraded Wynn Macau Ltd and SJM Holdings Ltd from ‘Buy’ to ‘Hold’, and lowered price targets for the shares of several Macau-based casino operators.

U.S.-based Telsey Advisory Group LLC said on Monday it is taking a more neutral near-term outlook on Macau. The brokerage stated that the “fundamental long-term growth story remains intact” but noted that VIP headwinds are likely to persist well into the third quarter of this year.

“The junkets’ ability to recycle capital has slowed, resulting in essentially one less turn a month. We attribute this to overall slower collection periods for junkets and increased capital control by the junkets, but also the consolidation of junkets within the industry,” Telsey wrote.

“Concerns about the Chinese economy are also likely the driving source behind this slowdown,” it added.