GGRAsia – Analysts split on notion June could end Macau slump

Analysts split on notion June could end Macau slump

Jun 02, 2016 Newsdesk Latest News, Macau, Top of the deck

Investment analysts covering the Macau gaming sector are divided on whether the city’s casino sector could post a monthly year-on-year revenue growth in the current month, ending a slump that started in June 2014.

While Union Gaming Securities Asia Ltd is forecasting casino gross gaming revenue (GGR) in Macau could post a year-on-year growth below 1 percent in June, other brokerages are hinting at contractions ranging between 1 percent and 8 percent.

Casino GGR in Macau declined by 9.6 percent year-on-year in May, marking 24 consecutive months of retreat, show official data published on Wednesday. Judged on a month-to-month basis, GGR increased by 6.0 percent.

“As we think about June, we currently see no reason that GGR shouldn’t be in line with the daily rate of around MOP580,000 [US72,500] that has been reported in recent non-holiday months,” Union Gaming analyst Grant Govertsen wrote in a Wednesday note.

He added: “This would result in total GGR of MOP17.5 billion (USD2.2 billion), and would represent the first year-on-year increase in GGR after 24 months of declines. Looking further ahead, we would expect July and August to see mid-single-digit declines in GGR before returning to growth in September.”

Mr Govertsen said GGR trends in Macau during the autumn are likely to be positively affected by the opening, respectively, of Wynn Palace and the Parisian Macao.

U.S.-based Wynn Resorts Ltd and its subsidiary Wynn Macau Ltd have yet to provide a date for when in the third quarter the under-construction Wynn Palace casino resort will open. The project was previously scheduled to open on June 25, after a plan to launch it on March 25 was dropped.

Sands China Ltd’s chairman and chief executive Sheldon Adelson said, on a conference call with investment analysts in April, that his firm was targeting a mid-September opening for its US$2.7-billion Parisian Macao on Cotai.

Still in the red

Deutsche Bank Securities Inc analysts Carlo Santarelli and Danny Valoy are not as bullish as Union Gaming on the performance of Macau’s gaming sector in June. The two analysts stated in a Wednesday note that GGR trends for May were worse than expected by investors, noting the market consensus had forecast a year-on-year decline of only 6.9 percent.

Mr Santarelli and Mr Valoy added that GGR growth for June was likely to improve compared to May’s year-on-year performance, but still remain in negative territory.

They wrote: “Over the last four years, win per day in June, on average, has been down 8.4 percent from May. If we were to assume an 8.4 percent sequential decline from the May win per day, for the 30 days in June, we would expect an around 6 percent year-on-year decline for the month.”

JP Morgan stated in a Wednesday note that “June could print the worst monthly GGR in 70 months”. The investment bank added that it expected June GGR in Macau to fall between 5 percent and 7 percent year-on-year, to between MOP16.0 billion to MOP16.4 billion, which would be the lowest monthly GGR tally since September 2010.

Wells Fargo Securities LLC’s Cameron McKnight also estimated in a Wednesday note that GGR would continue to decline in June as measured in year-on-year terms.

“We estimate June growth to track at around -1 percent year-on-year to -7 percent year-on-year. This assumes June same store average daily revenue will trend in line with historical seasonality… Our estimate implies daily revenues of roughly MOP540 million to 570 million.”

Brokerage Sterne Agee CRT was also forecasting June GGR in Macau would continue to decline in year-on-year terms, namely by between 5 percent and 8 percent.

In a note also carrying Wednesday’s date, Telsey Advisory Group LLC analysts David Katz and Brian Davis wrote that “discussions with company management teams suggest that there is some actual improvement in mass play, offset by declines in VIP, which provides for a positive profitability mix shift.”

They however added: “Although we concede that there are some less negative elements in market activity, we remain focused on significant growth in supply going forward and the demand necessary to support it, which is at the moment not clearly evident. We remain cautiously optimistic that the demand trends should improve as a result of the supply increases.”