Concerns about stricter government controls
Macau gaming revenues continued their upward trajectory for the month of June, but fell short of analyst estimates, according to multiple media reports. Bloomberg surveyed 11 analysts who predicted the city’s chief industry would see a 30 percent increase for the month; in fact, revenues grew just 25.9 percent, following a 24 percent increase in May.
Union Gaming attributed the shortfall in part to a visit by PRC President Xi Jinping to Hong Kong. “Hong Kong has been in a state of virtual lockdown” due to the visit, the agency reported, a situation that could have curbed high-end visitation to Macau.
Year-to-date, GGR is now up 17.2 percent, the team said, and the second quarter is “in line with expectations,” Union Gaming noted. “In all likelihood, but for the two high-level PRC visits to Macau and Hong Kong, GGR in 2Q17 would have fared better and would likely have exhibited modest sequential growth. As we head into 3Q17, we are currently forecasting 15 percent y/y growth and 2 percent sequential growth,” including 18 percent growth in July, 16 percent growth in August and 11 percent growth in September.
VIP play continues to grow, partly thanks easy comps from the prior year. “While we won’t have an accurate picture until the Big 6 have reported 2Q results, we expect VIP to come out slightly ahead in terms of growth rates in 2Q,” wrote the Union Gaming team. “Separately and quite importantly, we are not seeing any material impact from the recent installation of Know Your Customer measures across Macau’s ATM machines. We do not believe these measures will deter visitation to Macau nor a drop in ATM usage within casinos.”
Starting July 4, holders of Mainland China-issued China UnionPay Co. Ltd. bankcards may only make cash withdrawals in Macau at automated teller machines fitted with KYC technology including facial recognition checks.
A May note from brokerage Sanford C. Bernstein said that over time, “stronger anti-money laundering and know-your-customer procedures will likely create headwinds for junket activity and certain premium mass liquidity.”
Union Gaming analyst Grant Govertsen seemed to disagree. In an email to GGRAsia last week, he said, “We continue to believe that the KYC measures are not directly geared towards casino customers or the gaming industry. Rather, we believe they are an addition to ongoing capital flight controls from Mainland China, which will have the largest impact on those who come to Macau for the purpose of withdrawing, and then holding, Hong Kong dollars from their renminbi-denominated mainland bank accounts.”
In his analysis, he wrote, “It is important to keep in mind that this profile of bank card customer doesn’t fit any of the typical casino customer segments: grind mass customers typically cross the border with enough cash on their person so as not to need ATMs for gambling purposes; premium mass customers often already have cash outside of mainland China via business interests, etc., and VIP players receive credit from the junket system.”
But according to Bloomberg News, “Policy risks remain as Macau’s government and Chinese authorities put in new regulations to deter capital outflows.” The new outlet noted that the June arrests of 17 alleged proxy bettors also suggests stricter enforcement of gaming regulations, along with the conviction last month of 19 Crown Resorts Ltd. staffers for illegally promoting gambling on the mainland.
The Malaysian Star commented on the “revival in appetite” for gaming among high rollers and mass gamblers, but added, “Operators are cautious about the resurgence of VIP revenue, which is highly volatile compared to the more stable flows from mass market customers. While the VIP sector contributes just over half of Macau’s total casino revenues, junket patrons have been subject to greater legal scrutiny due to concerns over money laundering.”
