Firm: Draw no inferences from Q1
Gross gaming revenues for March 14-20 was MOP 4.1 billion (US$513.4 million), implying and ADR of MOP 585 million. That’s down from the first two months of the year, and seems to indicate the two-year recession will not end anytime soon.
But asset management firm Bernstein is telling investors should not make too much of weekly data, which could continue to be volatile, according to the Asian Gaming Brief. “While the weekly numbers may still have some relevance,” Bernstein noted, “we highlight our reduced conviction level on the reliability of these figures.”
Fourth quarter GGR was in line with analyst expectations, AGB added, and February was the strongest month in recent memory, thanks to the Chinese New Year and an extra day due to Leap Year. As a result, gaming stocks overall were up 40 percent over January. Bernstein has advised investors to be prudent, “as stocks may have gotten ahead of themselves and could face a near-term pullback, particularly if March and/or April GGR turns out weaker than expected.”
Union Gaming, meanwhile, maintains a -11.5 percent YoY estimate for Macau GGR in 2016. “Our discussions with company management teams suggest that there is some actual improvement in mass play, which is a positive dynamic, given the higher profitability of mass versus VIP and the need for mass market growth to support new Cotai projects in the future,” the firm wrote. “We remind investors that a key aspect of our thesis centers on the dramatic increase in supply forthcoming in 2016-2017 in the market”—a reference to the opening of several new megaresorts on the Cotai Strip.
According to the Jornal Tribuna de Macau, Sands China’s $2.7 billion Parisian Macao will open in November of this year; Wynn Macau Ltd.’s US$4.1 billion Wynn Palace, twice delayed, is expected to open mid-year; and MGM China Holdings’ $3 billion MGM Cotai, which will open in early 2017.
“LVS and WYNN are higher than the mid-range multiples at which we believe they should trade,” wrote Union analysts, “while MGM is attractively priced from a fundamental perspective.”
Amid the ongoing turbulence in Macau, more Chinese players are heading elsewhere to gamble, reports the Macau Business Daily. Among the alternatives are Vietnam, where the gaming industry is young, but booming, with casinos along the border with China generating about US$800 million in gross gaming revenues for 2015.
India is also an option, with legal gaming in three cities: Goa, Daman and Sikkim, though the black market is also active.
A third choice is proxy betting, which was a hot topic at the iGaming Asia Congress. Tim Shepard, COO of gaming operator Silver Heritage, called it “the most exciting part of this industry” today.
It’s not internet gaming, he said, because players are “not gambling online, (but) telling the operator how to play, where to play and how much.” The practice is legal in the Philippines, Vietnam, Cambodia and Nepal. Shepard says it’s growing among those on the Mainland—though it’s illegal in Macau.
“People in Mainland China haven’t stopped gambling,” he said, “they’re just not coming to Macau to do it. This massive proxy industry has struck up.”
GGRAsia reports that visitors to Macau are less satisfied with their experience. The latest Macao Tourist Satisfaction Index shows the numbers for the fourth quarter of 2015 were the lowest since the end of 2011; the index also dropped in the quarter from 69.6 points in the previous three months to 67.8 points, on a scale of 100.
When the Chinese do travel, they are spending a lot more. According to the World Travel and Tourism Council, in a report cited by the Financial Times, Chinese tourists spent 53 percent more on travel and tourism in 2015–$215 billion, compared to $140 billion in 2014.
“Chinese outbound tourism is growing like crazy,” WTTC President and CEO David Scowsill told the Times. “There were some significant shocks last year, in the stock market and the currency, but it didn’t slow the growth of travel and tourism. Once people have started to travel, they are reluctant to give that up.”
According to the WTTC, Chinese travel could expand by 7 percent per year over the next decade.
