TOUGH COMPARISONS

2014/10/8

From：Macau Business Daily

Investors say Golden Week casino visitation probably declined from a year ago, while this month’s gaming revenue growth will be compared to an exceptional October in 2013 when it jumped 32 percent. Brokerages are shifting to two-year stacks to avoid misleading comparisons

Not even numbers are on Macau’s gaming industry side this year. The historical success and double-digit growth era is coming at a ‘cost’ in 2014. A numeric one, but with deep implications in terms of stock values and investor sentiment – two factors that when on the downside mean millions lost.
Prior to October gaming revenue figures being published in a few weeks, investors are already anticipating the worst: a fifth straight month of declining revenues and a drop bordering on 20 percent year-on-year.
While the slowdown of revenues in Macau is due to factors like crackdowns on corruption, less credit for junkets and the smoking ban most of the negative headlines are caused by a statistical effect: a comparison with a record 2013, when the industry published figures going through the roof from revenues to profits to shares.
Some brokerages and banks are turning towards two-year stacks to compare this year’s performance in order to eliminate the effect of the record 2013 that is amplifying the magnitude of the current slowdown, thereby attempting to get a clearer picture.

Left behind

This statistical effect will probably reach its peak this month. October’s gaming revenues will improve when compared to September’s because of this month’s Golden Week but when the year-on-year figures pop up the reaction will be the opposite. It’s a record jump against a record decline.
According to current estimates, gaming revenues will decline almost 20 percent this month compared to a year ago. Wells Fargo now expects a 19 percent decline, a revised down figure from a previous 15 percent drop. Deutsche Bank says gaming revenues will go down by 18 percent. That’s the fifth straight month of diminishing revenues on a year-on-year basis with October’s drop being double that of September’s and three times greater than August’s.
In October last year, gaming revenues in Macau skyrocketed by 31.9 percent, the biggest increase of 2013. That’s the growth figure analysts will compare with in a few weeks. ‘It’s important to note that October 2013 is a tough [month] to compare as VIP and mass revenues grew by 28 percent and 45 percent, respectively’, said Wells Fargo in a note to clients. When compared to October 2012, gaming revenues in Macau this month are likely to go up 12.9 percent, quite a different scenario.
To achieve the performance of October 2013, when revenues totalled MOP36 billion, the gaming industry here had to amass a daily average of MOP1.2 billion from mass and VIP tables. That’s more than unlikely to happen. Since the Summer, average daily revenues have been running at around MOP850 million, and some investors expect that Golden Week daily revenue will hover around MOP1 billion.
Despite the 14 percent increase in Golden Week visitors to Macau this year, for the gaming industry the holiday period was probably a ‘false positive’, Union Gaming said this week. ‘Based on our casual observations over the weekend , we think casino foot traffic likely declined during Golden Week’, wrote the brokerage, citing the protests in Hong Kong that impacted the movements of mainlanders and Hong Kong travellers.

Copyright@Macau Business Daily