Casino smoking ban ‘negligible’, say analysts

2014/10/16

From：Macau Business Daily

Average daily revenues calculated by analysts at Telsey Advisory Group suggest that the impact of the full smoking ban is too small to affect casino performance.

Just days ahead of casino operators here starting to announce third quarter results, analysts at Telsey Advisory Group (TAG) play down the impact the full smoking ban that came into effect on October 6 will have on gaming revenues. ‘The good news is that expectations are multi-year lows over elevated fears of a collapsing Macau,’ the group’s latest note to clients reads.
While there have been concerns on how a number of factors will impact Macau’s overall gaming revenues, which have witnessed steady declines for four straight months now, analysts have, for the most part, been unanimous in calling this a rocky year. These factors include Beijing’s crackdown on corruption, the tightening of credit, the implementation of the full smoking ban in casinos, Chinese President Xi Jinping’s visit to Macau later this year and visa restrictions imposed on visitors from mainland China.
‘Based on weekly performance, the impact has been negligible, with the slowdown in average daily revenue from week 1 (Golden Week) to week 2 actually less severe this year than last despite the addition of a smoking ban this year,’ analysts write in the note.
According to official figures from the Gaming Inspection and Coordination Bureau (DICJ), Macau casinos raked in MOP36.5 billion (US$4.6 billion) in October last year alone, up 31.7 percent from the corresponding month a year earlier. And despite the fact that gross gaming revenues have dropped monthly since June, when looking at the accumulated gross revenue for the first nine months of the year casinos have raked in 5.9 percent more (MOP275.9 billion) than in the same period last year.
‘October and Golden Week this year are both simply not representative of what is to come in Macau,’ the brokerage firm said, adding that ‘the events that have unfolded in Macau and Hong Kong over the last couple of weeks are largely unprecedented, including smoking in casinos, the Hong Kong protests and the junket liquidity squeeze.’
In addition, analysts say new properties opening in Cotai in 2015 are ‘key positive catalysts for Macau names’ and ‘will make the space an attractive investment for investors’ that year.
The shift from the VIP segment to the mass market segment is likely to continue, according to analysts’ estimates ‘as higher margin mass market revenues significantly outpaced lower margin VIP business in the third quarter of 2014.’

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