The booming gaming business in Macau has been news for both the companies operating the casinos, as well as the government.
Investment banking house J.P. Morgan is forecasting a 31 percent jump in operating profits for Macau’s casino industry in the first quarter versus the same period in 2013.
The bank is basing its projection—which comes on the heels of a 20 percent year-on-year increase in gaming revenue for the three months ended March 31—on triple-digit growth rates in the high-margin mass-market sector.
“By segment, mass market continues to lead the growth with 39 percent year-on-year, or 5 percent quarter-on-quarter, revenue increase, while VIP revenue to register healthy 12 percent YoY, or flat QoQ growth,” wrote analysts Cusson Leung and Daisy Lu.
Overall, the bank expects EBITDA to grow 31 percent YoY and 4 percent QoQ.
At the same time, Macau’s government has amassed a budget surplus that is already more than half its target for the year, thanks to gaming tax collections that are soaring with the pace of gaming revenue growth.
The Financial Services Bureau posted a surplus of nearly MOP35.1 billion (US$4.38 billion) in the first quarter, a 24.6 percent increase over the previous year, good for 54.7 percent of 2014’s entire projected surplus of MOP64.16 billion.
This does not include the finances of autonomous public bodies such as the Macau Foundation. Factoring these in raises the forecast to 76 billion.
The effective tax of 40 percent of gaming revenue is driving the increases, amounting to 35.8 billion in collections and accounting for 84.9 percent of the city’s revenue through the first quarter, a year-on-year increase of 21.5 percent.
Gaming revenue grew 19.8 percent in the three months ended March 31.
Surges in property income also contributed to the surplus, as revenue from this sector more than tripled to MOP1.33 billion.
The government’s overall revenue was MOP42.15 billion in the January-March period, 22.1 percent more than a year earlier.
