Gaming slowdown

2015/2/25

From：Macau Business

Just days ‘til the end of the month. Yet, this could be the worst GGR on record since November 2010. Analysts are forecasting a gaming revenue drop of up to 50 pct for the month of February.

Macau casinos are suffering the consequences of the strong negative winds blowing in from Mainland China’s economy, with gross gaming revenue (GGR) now expected to shrink 51 per cent in February, research firm JL Warren Capital noted in a report on the gaming industry.
‘The environment of declining global competitiveness and profitability that many Small and Medium-sized Enterprises in this old economy face is causing owners, managers and employees to cut back on Capex and consumer spending. If slower growth ultimately leads to declining employment, both actual unemployment and the anticipation of unemployment will weaken consumer demand. Add to that the anti-corruption campaign’s blight on conspicuous consumption, and it is no surprise that Macau casinos are empty and Chinese New Year spending looks likely to be subdued’, it was explained in the report on the Macau gaming industry.
On February 8, JL Warren Capital predicted that GGR would drop 46 per cent year-on-year in February but the new report says the scenario is worse than expected and that they are now forecasting a 51 per cent fall to MOP18.5 billion. The research firm also notes that investors should be surprised by the ‘mass segment decisive deceleration’.
In its earlier forecast, JL Warren Capital assumed GGR would shrink to approximately MOP20.7 billion with average daily revenue (ADR) accounting for MOP668 million. Now ADR is assumed to be MOP661 million, which will result in a drop to MOP18.5 billion and a year-on-year decline of 51 per cent from MOP38 billion.
While February 2014 was the best month ever for the gaming industry, if the JL Warren Capital forecast proves right then February 2015 will be the worst month since November 2010, when gross gaming revenue accounted for MOP17.4 billion.
‘China’s old economy – low-tech and medium-tech manufacturing dependent upon export markets – is sputtering. These factories are shutting down. Globally, trade is no longer growing at more than twice the rate of GDP, as was the case during China’s Golden Age of 1980-2007’, it was added to explain the downtrend in the Special Administrative Region.
JL Warren Capital also stressed that the influences of Mainland China’s economy are not creating new factors that deteriorate casino revenues but rather amplify the effects of Macau’s debit crisis, increasing global competition, the corruption crackdown and the consequences of the deterioration of the spending power of average visitors.
The research firm highlighted that despite low expectations, February was a disappointing month for the gaming concessionaires.
‘We expect that the sector’s earnings and EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization] for the full year will be revised down once again after the GGR during the CNY disappoints despite the already low expectation’, the report reads. ‘We see approximately 10-15 per cent downside in the stocks of Macau casino operators’.

Copyright@Macau Business