SILVER LINING?

2014/10/21

From：Macau Business Daily

Absolute zero. That’s the prognosis for gaming revenue growth this year. Analysts are also bracing for the worst October ever. Given the numerous adverse factors affecting the industry, the pundits say Macau is holding its own.

Macau’s gaming industry is going to remain flat – at 0 percent growth – in comparison to 2013, the latest report from JL Warren Capital says. According to the predictions of the gaming analysts at the American-based research equity company, this will be the first time gross gaming revenue has not grown since 2002, the first year that Information from the Statistics and Census Service (DSEC) was available.
According to JL Warren Capital, the gaming industry here is being affected by many factors, ranging from the Central Government’s anti-corruption campaign to the demonstrations in Hong Kong that are reducing the number of group tours to the territory.
‘China’s anti-corruption campaign now appears to be semi-permanent; the secondary property market, a commonly used form of collateral for VIP borrowing, remains sluggish; junkets are experiencing a credit crunch, with smaller operations going under or being consolidated; prospects for global economic growth are worsening; ongoing protests in Hong Kong are reducing group tours to Macau, and a new smoking ban effective October 6 is likely to drag on casino attendance’, the report from the equity research company says.
According to DSEC, since 2002 – no data previous to that year is available – gross gaming revenue has always grown more than 8.3 percent. In fact, since 2002 the worst years for the gaming industry were 2005 (growth of 8.3 percent) and 2009 (growth of 9.6 percent).
As for the month of October, the prospects are even darker. JL Warren estimates that there will be a 20 percent drop vis-a-vis October 2013, when gross gaming revenue was MOP36.5 billion. This would be the worst result in year-on-year terms ever, as prior to that there is no monthly information available.
‘Assuming average daily revenue of around MOP880 million for the balance of the month, we estimate around MOP947 million in October, representing negative 20 percent growth versus 2013’, the reports says.
Although the numbers are considered negative the balance of the year is not so negative for the report in comparison with 2012.
‘If we adjust 0 percent growth from a very high base of 2013 GGR and compare 2014 to 2012 instead Macau GGR growth comes to an annualised rate of around 8 percent, which still looks decent’ the report noted. ‘The figure is below investors’ expectations but considering that gambling is discretionary consumer spending and the Chinese economy is slowing decisively, high single digit year-on-year growth is respectable, and perhaps even a bit higher than what a normalised growth rate should be’, it concluded.

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