Macau stumbles on new year celebrations

Macau stumbles on new year celebrations

Thursday, February 2, 2017
Drop back from December growth rate

The moderation in year-on-year growth in the gross gaming revenue figures from Macau in January is being viewed by analysts as a slight slip-up before Chinese New Year rather than any kind of long-term trend or return to the reverses seen in the past two years.

The market saw a 3.1 percent rise on GGR to MOP19.3bn ($2.4bn) in the first month of the year, according to the data from the Macau Gaming Inspection and Coordination Bureau. However, this represents a slowing of the growth rate enjoyed in the last quarter and particularly December which came in 8 percent higher than the previous year.

The slowing rate raised the spectre of a return to the market slump of the past two years, how analysts at JP Morgan were quick to allay fears, suggesting they believed that January was “more of a blip than a trend”.

Though the Chinese New Year took place this past weekend, the holiday celebrations will continue into February. A report published in mid-January by analysts at Morgan Stanley suggested strong hotel bookings and rising room rates ahead of the new year in the Macau. It has been noted by analysts that the Chinese New Year fell wholly in February last year.

The share prices of Sands China, Wynn Macau, Galaxy Entertainment and SJM Holdings all lost ground in trading in Hong Kong on the news of the revenue figures. Analysts at Nomura suggested that investors had become too optimistic at the end of last year at the prospect of a return to growth for Macau’s VIP segment. “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.”

There was brighter news from the results published this week by Wynn Resorts which showed the new Wynn Palace property which opened last year contribute to a 37 percent rise in further-quarter revenues for the company to $1.3bn. The Wynn Palace brought in $418.7m for the three months to December. There was some cannibalisation with the existing Wynn property seeing revenue decline over 10 percent to $465.3m.

Similarly suffering cannibalisation in the fourth quarter was Sands China. In its results late last week the company showed total property EBITDA down 3 percent quarter-on-quarter to $610m despite the opening of the Parisian property last year. However, Morgan Stanley saw some bright spots in the results including the mass market ‘grind’ revenue figure which was up 8 percent year-on-year and which accelerated with the help of the Parisian.

Totally Gaming says: The Macau picture is clouded by the timing of the Chinese New Year – among other factors – so it would be foolhardy to take anything more from January’s numbers other than the usual warning that the recovery in the gambling enclave will be a rocky path as opposed to a straight-line graph heading ever upwards.

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