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Wells Fargo: Ups and downs ahead

Third quarter gross gaming revenue expected to rise 16 to 22 pct

Brokerage firm Wells Fargo predicts Macau’s gross gaming revenue in June will grow by 16 to 22 per cent, implying daily revenues of between MOP615 million (US$76.58 million) and MOP645 million.
Last month, the city saw a 23.7 per cent year-on-year increase in gross gaming revenue, the highest year-on-year increase since February 2014.
Recent monthly revenue trends and data point to positive growth, say analysts.
The brokerage firm perceives that ‘this recovery could stall once the stimulus from loose credit and the Chinese housing bubble wears off’, while also pointing out that ‘a number of policy overhangs and license renewals’ will happen in the near future.
Meanwhile, according to the group’s survey, room rates in July will drop 5 per cent year-on-year, with ‘August tracking down in the low-single digits’.
The analyst group points out that this is an ‘improvement from the second quarter’ noting that same store rates in the market were ‘down about 7 to 8 per cent, which followed an 11 per cent decline in first quarter’.
Regarding hotel occupancy rates, Wells Fargo believes they will remain at 86 per cent during the third quarter.
With the new Taipa Ferry Terminal having commenced operations on the first day of June, the analysts received mixed commentary over the new infrastructure, with some complaining about the long walks from the bus station to the pier, and others pointing out ‘the lack of stores and restaurants’.
Nevertheless, the brokerage is optimistic about the improvement to transportation once the infrastructure is fully completed.
‘In particular, we think improved transport links to the Cotai Strip will be a huge positive – as they are expected to divert passengers and traffic away from the crowded and congested Gongbei Gate and narrow backstreets of the Macau Peninsula, and send customers straight to the Cotai Strip,’ stated Wells Fargo in its weekly report.
On the other hand, the analysts also noted the requested report to be submitted by the gaming operators to the MSAR Government, regarding the status of security in the wake of the attack at Resorts World in the Philippines.
The brokerage predicts that incident could lead to local casinos focusing more attention on their security measures.