“A shaky foundation”
While the International Monetary Fund has improved its economic growth forecast for Macau in 2017, up from 0.2 percent to 2.8 percent, a Kuala Lumpur analyst at UOB Kay Hian says investors are overly confident about the a recovery that may not be sustainable.
“The market’s being too bullish about the quantum of industry recovery,” said Vincent Khoo.
According to the Macau Daily Times citing a report from Bloomberg Intelligence, oversupply in the gaming sector could be a problem for Macau. Planned gaming tables through 2018 could add about 40 percent to the market’s 2014 total, and the number of hotel rooms may jump by 80 percent.
“Some of the properties definitely have a lot of overlap,” said Paul Chan of Invesco Ltd.
The Daily Times report noted that “the latest industry figures don’t bode well for bulls. Gross gaming receipts climbed just 3.1 percent in January, missing the median analyst estimate of 8.5 percent.”
According to GGRAsia, Japanese brokerage Nomura says Macau should post 6 percent compound annual growth rate in GGR from 2017 to 2019, with the mass table games outpacing VIP. Nomura expects 2017 GGR to be the equivalent of US$29.9 billion, up 8 percent year-on-year; moderating to 6 percent expansion in 2018; and recording 4 percent year-on-year expansion in 2019.
Nomura analysts Richard Huang and Joyce Yang predict the mass market will grow to 71 percent in 2017 from 54 percent in 2012 while the non-gaming contributions will grow to 17 per cent. “New tourism facilities will make Macau more like Las Vegas,” Huang said. “It can be a holiday resort, and not necessarily just a gaming hub. It will attract more conference and exhibition clients, too.”
He added there is “little space for the high-end market to improve” as China continues to crack down on corruption. “And with the yuan staying weak, China’s capital controls are unlikely to be loosened,” Huang said.
However Morningstar analyst Chelsey Tam said there is clearly a “cyclical VIP recovery” in the making.
“We heard from several junkets that the number of players and the frequency of visits have increased,” Tam told the South China Morning Post, “while the bet size per customer has not changed.”
Rich Duprey of the Motley Fool website wrote, “It looks like Macau’s rally is running out of steam. While gaming revenues climbed for the sixth straight month in January, the rate of increase was below analyst expectations, indicating the recovery may be petering out.”
He said “Macau remains standing on a shaky foundation” as Beijing tries to transform the district “from a destination reliant upon VIP gamblers into one more attractive to tourists and casual gamblers.”
