JPMorgan bullish on second half
Investor fears that Macau will crack down on gaming industry regulations to the detriment of operators have not been realized so far, according to a July 1 note from Union Gaming Securities Asia Ltd.
Union Gaming expects GGR to grow 16 percent in 2018 and 12 percent in 2019, slightly lower than previous estimates. But analyst Grant Govertsen noted, “Despite significant noise, most regulatory fears remain unfulfilled.”
The fears are based on a crackdown on unlicensed foreign exchange dealers and limits on the use of China UnionPay ATMs at some Cotai casinos.
“Money exchange kiosks on the China side of the border have reopened, while Cotai UnionPay shops are generally operating as usual,” Govertsen said. “To the extent broader capital controls have weighed on Macau via some of the more recent actions taken against underground banking, there has been no specific targeting of Macau (i.e. if anything Macau would only be collateral damage).”
He added that U.S. gaming companies operating in Macau should not be negatively affected by a trade war between China and the Trump administration. “We have heard nothing on the ground that suggests any of the operators are potential political targets as it relates to trade war fears—although this would require direct intervention by China to accomplish,” said Govertsen. “In sum, while May/June was slower than expected, industry insiders remain generally upbeat about their own business trends.” Data show that GGR in Macau’s VIP segment grew 14.4 percent year-on-year in the second quarter, while mass play, which Govertsen called the “backbone” of the industry, was up 20.8 percent.
Also on July 1, JP Morgan Securities (Asia Pacific) Ltd. said in a note that, while gaming revenues in the jurisdiction declined by an average of 18 percent in the second quarter—due in part to the FIFA World Cup—the brokerage remains bullish on the Macau casino sector.
And Japanese brokerage Nomura said it expects 10 percent year-on-year growth in GGR for July. “Third-quarter and fourth-quarter 2018 GGR growth should settle into a range of high single digits to low double digits of percent year-on-year, as the drag from low VIP hold percentage and the World Cup in June-July stabilizes,” Nomura analysts wrote.
A note from brokerage Sanford C. Bernstein said it anticipated July GGR in the range of MOP25.8 billion (US$3.19 billion) and MOP26.1 billion, an estimated increase of 12 percent to 14 percent year-on-year.
Despite the encouraging words, Hong Kong-based risk management firm Steve Vickers & Associates has warned that the trade conflict between the U.S. and China will “alter the shape of commercial activity across Asia,” harming some companies, but presenting opportunities to others.
Meanwhile in Macau, lawmakers have approved on first reading a government-backed bill that would ban casino workers from walking onto a gaming floor outside work hours. The bill now goes to the Legislative Assembly for review, then will return to the full assembly for second reading and a vote.
The government says the casino floor ban aims to curb problem gambling among casino employees, particularly dealers.
