But early October was “solid,” say analysts
Typhoon Mujigae, which struck Macau midweek through the annual Golden Week holiday, proved an effective deterrent to some Mainland Chinese tourists, who visited the SAR in fewer numbers than last year—but only on the worst day of the storm.
According to Bloomberg News, on Sunday, October 4, the day Mujigae made landfall, visitation by Mainlanders dropped 16 percent year-on-year. However, tourism for the entire week was 7.1 percent higher than in the same period in 2014. Meanwhile, in Hong Kong, visits from China dropped to 2.3 percent from 6.8 percent, according to government data.
Both Macau had looked to Golden Week to recoup part of the losses incurred over 16 straight months of decline. But there is still “pent-up demand coming into the market, especially over holiday periods,” Sanford C. Bernstein analyst Vitaly Umansky told Bloomberg. “It would be a bad indicator if there were no growth or a decline in visitation.”
GGRAsia reports that GGR in Macau reached MOP6.4 billion (US$801.7 million) during the holiday. Average daily revenue in Macau casinos rose to about MOP914.3 million the first week of October. But Umansky said operators and investors will be looking at the rest of the month and the grand opening of Studio City on October 27 before valuing casino shares. Good results there will be “critical to maintain stock price levels.” Studio City is a casino resort on the Cotai Strip majority-owned by Melco Crown Entertainment Ltd.
Analysts looking at early October pronounced Macau “solid” in terms of GGR from gaming tables. Though the numbers are down slightly, it’s not bad news considering the interruption of Golden Week. Table-only GGR was about MOP8.5 billion ($1.1 billion) through October 11. That’s just 6 percent down from the same period last year. “We note that early October revenues benefited from China’s Golden Week holiday,” wrote Sterne Agee analyst Cameron McKnight. “We remain on the sidelines on the Macau gaming names as estimates and valuations adjust to a ‘new normal.’”
On the other hand, Morgan Stanley Research analysts rained on the parade of anyone who believes recent gaming revenues are a positive sign. “While many argue that September and Golden Week revenue came better than expectations, we disagree. September mass revenue declined by 12 percent month-on-month. Junket VIP roll came at MOP211 billion, the lowest since July 2009. For Golden Week, GGR dropped 30 percent year-on-year compared to Golden Week last year.”
Daiwa Securities Group analysts hammered that message home, predicting an October GGR of MOP19.5 billion, “equivalent to minus 30 percent year-on-year”—not good, but certainly within expectations given the freefall in the industry since last June.
The Macau Business Daily said retailers and restaurant operators were discouraged by the holiday numbers. “We didn’t have high expectations for sales given the current economic situation. We just hoped sales could be stable. But the typhoon disappointed us,” said Lee Koi Ian, general manager of jewelry chain. “We have fewer high-spending customers now; our overall sales dropped by between 20 and 30 percent year-on-year.”
Even so, he hopes to see business pick up. “After all, the second half of the year is the hot season for jewelry retail until the Chinese New Year of the following year. As such, our expectations are higher than for the first half of the year.”
Grant Govertson of Union Gaming Group downgraded Macau, and even called a “mea culpa” on earlier predictions. In January, Govertsen said “stocks would begin to discount a recovery some six to nine months in advance before we actually started to see greenshoots, and that upon stabilization the stocks would rally tens of percents on an almost overnight basis. We were dead wrong.
“We grossly underestimated the effects of policy and how quickly it would run through corporate P&Ls, how sharp the continued declines in VIP would be, and how fiercely competitive the hunt for Chinese wallet-share had become on a worldwide basis. We also missed the effects on sentiment of continued economic malaise coming out of Mainland China, as well as various austerity measures (e.g. RMB devaluation).”
All these factors, he wrote, “lead to continued downside pressure.”
Malaysia also did not see a big boost in tourism during Golden Week. According to GGRAsia, analyst Samuel Yin Shao Yang of Maybank IB Research said the country’s recent offer of visa waivers for groups of Mainland Chinese tourists “has yet to make a meaningful impact on Resorts World Genting.
“As the Malaysian Home Ministry made its announcement only on 26 August 2015, slightly more than one month before the October Golden Week, it was likely too late for large groups to make fresh travel plans,” he said.
