Moody’s upgrades to “stable,” affirms “Aa3” rating
The numbers for Macau were brighter than expected in May. The world’s top gaming jurisdiction saw gross gaming revenues grow at a remarkable 23.7 percent, well exceeding analyst predictions of 16.5 percent.
Moody’s Investors Service upgraded its outlook on Macau to “stable” from “negative” based on the “assessment that credit risks have become broadly balanced,” according to GGRAsia. The agency also affirmed Macau’s “Aa3” credit rating.
It’s a marked turnaround from May 2016, when Moody’s downgraded Macau’s rating to “Aa2” and assigned it a negative outlook.
Union Gaming analyst Grant Govertsen said GGR in Macau on a year-to-date basis is now up 15.8 percent. He pointed out that the numbers for May would have been even higher if not for the visit last month by Zhang Dejiang, chairman of China’s National People’s Congress, which could have had a discouraging effect on the gaming action.
“Further, the calendar was unfavorable with one fewer Sunday this year,” Govertsen added. “GGR per day was MOP733mm in May, which represented a 9 percent sequential increase relative to the seasonally slower April.”
He credited growth in the mass-market segment, which is “generally being enjoyed by most of the Macau Big 6.” At the same time, Govertsen added, “the market-wide VIP growth rate is accelerating, driven by a confluence of factors not the least of which is coming up against the easiest comps of the year as 2Q16 represented the low watermark of the GGR downturn.
“It is also important to point out that the VIP trends seen in 1Q17 largely seem to have been maintained into 2Q17,” he said. Wynn Resorts’ two properties in Macau continue to outperform the market by a very wide margin, the analyst noted. “However, we do expect generally better VIP results out of virtually all of the rest of the Big 6 in 2Q17 (as compared to ear-on-year growth rates delivered during 1Q17).”
Almost needless to add, Union Gaming is “very encouraged by the May results, which we had expected to be suppressed by the Zhang visit as well as the slightly unfavorable calendar,” Govertsen concluded.
The gaming industry in Macau continues to climb back from a historic downturn that started in the summer of 2014 and was attributed to a crackdown on money laundering and graft by the Beijing government. Last August was Macau’s first month in the black after 26 consecutive months of decline. Analysts expected May to be the 10th straight month of GGR growth in Macau, but forecast a boost of 14 percent to 20 percent from the prior-year period.
For the first four months of 2017, GGR amounted to MOP83.64 billion (US$10.43 billion) for year-on-year growth of 13.8 percent.
In its report, Moody’s said that the “ongoing shift to mass-market gaming from VIP gaming will support the profitability of gaming operators and enhance the resilience” of Macau’s gaming sector.
“Rising incomes in China and Macau’s proximity to the mainland will continue to support demand for Macau’s well-established gaming and tourism market, even in the face of growing competition from other parts of Asia,” said the ratings agency.
It added, “We expect Macau’s economic recovery to endure over the next two to three years, supported by the ongoing diversification towards non-gaming activities.”
The report also mentioned that the Macau’s government’s “healthy balance sheet offers it the means to support the ongoing economic transition and mitigate potential negative shocks,” reported GGRAsia.
