Typhoon Kalmaegi to crush September revenues

2014/9/23

From:Macau Business Daily

Gaming revenues in September are running 14 percent below the August average, more than double what the market was expecting two weeks ago.

It’s already been a rocky month for gaming revenues but Typhoon Kalmaegi, hitting Macau last week, could have made things worse for the industry here.
According to the latest figures, average daily gaming revenues in Macau have topped MOP800 million since the beginning of the month, a rather weak performance. That’s 15 percent below the August average (MOP932 million) and 20 percent less than Macau’s regular performance (between MOP1 billion and MOP1.1 billion).
In a note to clients yesterday, Wells Fargo, wrote last week’s ‘results may have been affected by Typhoon Kalmaegi, which disrupted business on Tuesday in Hong Kong’. The typhoon was just one more factor pressuring gaming revenues here that are likely to record their worst month of the year in terms of growth.
Wells Fargo plus several other banks and brokerages expect revenues to drop 10 percent year-on-year in September. In August, gaming revenues declined 6 percent, and 3 percent in June and July. Wells Fargo noted that the Chinese economy continues to perform below expectations and that ‘weak growth trends into Golden Week and the smoking ban may create additional uncertainty’.

September blues

With a week left until the end of the month, it is clear that the first positive signs in the first days of September didn’t materialise.
In the first week of this month, the average daily gaming revenues was around MOP875 million. That’s 4 percent above August’s last week and only 6 percent down on August’s full month. At the time, the market expected gaming revenues to drop in September by ‘high-single digits’. After two weeks, the outlook was revised down to a high-single to low double digit decrease. Some banks, like Deutsche Bank, even admit that gaming revenues will probably tank 18 percent, the worst month for years in Macau.
With revenues plunging, stocks are following. Gaming stocks continue to underperform the market by a large margin.
Last week, for example, shares of casino operators lost one percent against a one percent gain from the S&P500, the index on which the world’s major companies are listed.
Since the beginning of the year, gaming stocks have declined 3.5 percent, underperforming the S&P500 by 4 percent. But the worst is left for year-to-date comparison. Since January, shares of operators lost 12.9 percent, running 21.7 percent below the market (S&P500).
With cloudy forecasts ahead, the industry in Macau will continue to face new headwinds such as possible strikes from gaming workers during Golden Week or accusations from Macau trade unions that operators here are increasing the number of VIP gaming rooms to bypass the smoking ban. All events that will likely continue to shake gaming stocks.

Copyright@Macau Business Daily