Macau recovery continues in December

Macau recovery continues in December

Wednesday, January 4, 2017
Yearly fall but gaming revenues now on growth path

Analysts believe January could be the best month yet in Macau’s nascent revenue recovery as the numbers for December showed the upward trend continuing as the fourth quarter closed out the year.

According to the latest figures from the Gaming Inspection and Coordination Bureau, December gross gaming revenue rose 8 percent to MOP19.8bn (US$2.45bn) compared with the same month in 2015. This confirmed the trend from October and November which both achieved solid single-digit percentage increases in year-on-year revenue.

The performance from the fourth quarter helped pare the losses for 2016 as a whole which saw gross gaming revenues fall back 3.3 percent to MOP23.2bn for the year.

Analysts at Union Gaming are hopeful January will continue to recovery path. “Even though the January calendar is unfavourable with one fewer Friday and one fewer Saturday, we expect the growth rate could be the highest yet during the recovery period,” said Union Gaming in a note on Monday.

In December, analysts from Morgan Stanley upped their forecast for GGR growth in 2017 to 10 percent from previous estimates of 2 percent. “We believe the Macau cycle has turned and 2017 could show 10% GGR and 13% EBITDA growth, the first in four years,” the analyst team wrote.

The Morgan Stanley team are particularly keen on the mass-market growth story for 2017, suggesting revenues in that segment will rise 15 percent over the course of the year while VIP play will growth by 6 percent. Previously, Morgan Stanley had VIP plays pegged at a 4 percent decline.

Union Gaming also believes Macau revenues in 2017 will grow by high single digits.

Also in December, gaming analysts at ratings company Fitch suggested Macau had hit the bottom of the cycle and was now well on the road to recovery. “Macau gaming has better long-term prospects given investments in new supply, improvements in mass market indicators and under-penetration of gaming throughout the rest of Asia," the team wrote in December, before these latest figures were published.

The year ahead won’t all be plain sailing for the Chinese gambling enclave, however. The Morgan Stanley team point out that continued capital outflows from China, combined with currency depreciation, might presage a further clampdown on corruption by the Chinese authorities. There is also the potential of a ban on smoking in VIP areas in Macau in the second half to help mute optimism.

Totally Gaming says: The full-year figures from Macau – the third year of declines across the market – mask an improving picture in the territory. There are still issues and the ability of the Chinese authorities to put a brake on excessive euphoria should not be easily dismissed. However, the fact that it is likely to be a revival led by mass-market gaming is a good sign as has been the ability of the market to absorb new supply in recent months.

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