Is it a blip or a trend?
After five months of incremental growth following more than two years of recession, Macau’s gaming industry fell short of analysts’ predictions for the month of January.
Gross gaming receipts were up 3.1 percent to 19.3 billion patacas (US$2.4 billion), according to data from Macau’s Gaming Inspection and Coordination Bureau. But it was a letdown after December’s 8 percent year-on-year increase and the median estimate of 8.5 percent from analysts surveyed by Bloomberg.
“People are still concerned about the Chinese economy and anti-corruption,” said analyst Michael Ting of CIMB Group Holdings Ltd. “The worst is over, but Macau’s recovery is going to be quite volatile and choppy.”
The recession began in mid-2014 when President Xi Jinping announced a crackdown on graft, money laundering and corruption in Macau, China’s sole legal gambling enclave. That sent high rollers running and led to the historic downturn, which only began to ease in August 2016.
Since then, operators have looked forward to a slow but continuous upward trend. January’s numbers were a disappointment, and the typically robust Chinese New Year celebrations could also fall flat, with revenue growth at the low end of estimates that ranged from 5 percent to 12 percent, according to the CDC Gaming Report.
“It is fair to say that some analysts and investors got too excited about the VIP segment, and the V-shape recovery in VIP demand is not coming through,” said Nomura Holdings Inc. analyst Richard Huang.
All this said, 614,000 tourists visited Macau in the first five days of the Chinese New Year holiday that kicked off January 27, an increase of 5.7 percent compared with 2015. Tourism from Mainland China, which accounted for about 68 percent of arrivals, was up 6.6 percent for the period.
But the picture is not bleak, and the recovery continues, said JPMorgan Chase analyst DS Kim who said, “The disappointing January was more a blip than a trend.”
Union Gaming analysts wrote that GGR for January was the result of soft VIP volume. “The results are especially disappointing given what appeared to be a very strong start to the month.” The group called the Chinese New Year “good, but not great” from a volume perspective, and added, “We had initially hoped for a high single-digit growth story when looking at January and February on a combined basis. But the soft January print causes us to be more cautious and now expect around +4 percent for the combined period.”
According to Macau Business, Ambrose So, executive director and CEO of SJM expects the Year of the Rooster to bring “renewed growth and prosperity” after more than two years of decline.
“The market needs to wake up, and the rooster arrives really on time for that,” said So. “As everybody knows, the rooster is the alarm clock of the animal kingdom. We anticipate it will bring renewed growth and prosperity to Macau.”
Macau’s 38 casinos ended 2016 with MOP223.21 billion in revenues, a decrease of 3.3 per cent year-on-year, according to information from the DICJ.
