Down but not out

Although local monthly gross gaming revenue (GGR) growth fell 9.5 per cent month-on-month in April to MOP17.34 billion (US$2.17 billion) according to data from the Macau Gaming and Inspection Bureau (DICJ) – marking the 23rd consecutive month of decline – it’s first quarter GGR still represents four times that of the Las Vegas Strip. In the first quarter of 2016 the Las Vegas Strip, the second biggest gaming market in the world, registered US$1.58 billion (MOP 12.7 million) in gross gaming revenue, a 1.6 per cent decrease year-on-year, according to the Nevada Gaming Control Board Gaming Commission, while the MSAR registered US$7 billion (MOP 55.94 billion), a 13.3 per cent decrease year-on-year, but still representing almost four times the Las Vegas Strip’s GGR and more than double that of the entire state of Nevada’s total GGR of US$2.83 billion (MOP 22.62 billion). Silver lining with clouds on the way While the April results exceeded some analysts’ estimates, as reported by Business Daily, most stick firm with their annual predictions and those for next month. The Telsey Advisory group maintains that although their April prediction was 38.8 per cent higher than the registered, since the cumulative GGR in the first four months of the year was down 12.4 per cent year-on-year they maintain their forecast for an 11.5 per cent year-on-year decline for the annual Macau GGR this year. ‘Our discussions with company management teams suggest that there is some actual improvement in mass market play offset by declines in VIP, which provides for a positive profitability mix shift. 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 at the moment is not evident,’ the research firm states. The Brokerage Sanford C. Bernstein Ltd. research group, which estimated an 11 per cent or 12 per cent GGR decrease in April, justifies the better than expected results as being helped by the long weekend of the May 1 holiday reined in by relatively flat year-on-year mass market results and the 20 per cent drop in the VIP market year-on year. The group also predicts the improvements in transportation infrastructure and the opening of large scale integrated resorts between 2015-2018, together with rejuvenated growth created by the mass market, will help Sands China, Melco Crown, Wynn Macau and Galaxy shares overperform in 2016, while predicting that SJM Holding shares will underperform due to the group’s ‘delay in coming to Cotai (not likely prior to early 2018), significant exposure to low quality Peninsula-based satellite properties, lack of scale to focus on mass at Grand Lisboa, and corporate governance and conflicts issues,’ Bernstein stated in a report. Meanwhile, Deutsche Bank noted that the win per day in May, on average, has been up 1.3 per cent from April, estimating a 1.3 per cent sequential growth from the April win per day in May, while expecting an 11 per cent year-on-year decline in GGR for next month.