January stall was short-lived
The recovery of Macau’s gaming industry is back on, according to the latest figures from the city’s Gaming Inspection and Coordination Bureau.
The numbers for February beat analysts’ expectations with gross gaming revenues up 17.8 percent year-on-year. Analysts disappointed by January’s 3.1 percent growth had forecast between 5 percent and 11 percent growth for the month, reported the Asia Gaming Brief.
“The implied ADR for the last nine days of the month was MOP 744 million, and the period exhibited strong rebound in what is normally a quieter post-Chinese New Year period,” said brokerage Sanford C. Bernstein in a note. “We believe a large portion of the upside surprise in February, especially the latter part of the month, was strong VIP—strong volumes, somewhat helped by high hold. VIP growth may have likely shown mid-20s percent growth year-on-year.”
Christopher Jones of Buckingham Research Group called January “a dud” and February “a stud.” Jones said last month’s results should “drive momentum back into a sector that has slowed, post a mixed 4Q16 earnings seasons.”
Looking at January and February combined, the market is up a healthy 10.6 percent, Jones reported. He said VIP demand “did pick up materially in February, aided by a strong hold later in the month” and projects March GGR of 10 percent to 12 percent.
Telsey Advisory Group called February an “upside surprise” and said industry sources attribute the growth to “sustained strength in the junket and VIP play as well as premium mass market play throughout the month after the Chinese New Year, which would be a surprising trend if correct.”
Brokerage Wells Fargo Securities believes VIP play will outstrip mass in 2017. “We expect VIP growth to accelerate for the next three quarters, up 15 percent for the full year. In contrast, we expect higher margin mass-market growth to decelerate through 2017, with 4 percent full-year growth,” said analysts Cameron McKnight and Robert Shore in a report.
They differ from the market consensus, expecting growth “to be driven by the lower-margin VIP segment as a result of tighter capital controls driving premium mass customers back to the VIP junkets” along with “Chinese liquidity growth and a housing bubble.”
Japanese brokerage Nomura said it expects mass-market table games GGR to be 7 percentage points higher than that for VIP table games from 2017 to 2019.
