Choppy year turns rocky

2014/8/19

From:Macau Business Daily

Analysts at Wells Fargo are saying that Macau estimates for 2015 are 10 percent too high.

Throughout most of the previous months analysts from various brokerage firms and investment banks have been labelling this a ‘choppy’ year. With Beijing’s crackdown on corruption, the restriction on mainland Chinese transit visas while here, the month-long World Cup, the slowdown of the VIP segment and the implementation of the full smoking ban to come into effect October 6, analysts have revised down their estimates on a monthly basis and even on a quarterly basis.
Now, analysts at Wells Fargo Securities, LLC say that Macau estimates for 2015 are 10 percent too high. ‘With mass [market] growth slowing in July and no sign of improvement in August, trends have arguably turned from choppy to rocky,’ the American investment bank said in its latest note to clients. ‘We believe 2015 estimates are [between] 5 and 10 percent too high assuming same-store VIP/mass growth of 2/15 percent.’
These forecasts are similar to those of 2012, analysts said, and based on the number of factors affecting gross gaming revenues here, chances are that uncertainty will persist into the fourth quarter of the year. ‘We believe Transit Visa changes are weighing on premium mass, and the continued (and very real) Chinese anti-corruption campaign could impact player sentiment and spending,’ the note reads. ‘Moreover, the [October 6] smoking ban has not yet come into investor or sell-side focus and remains an unknown.’
Smoking will still be allowed in VIP rooms and smoke-designated areas throughout the mass floor, according to both the Health Bureau and Gaming Inspection and Coordination Bureau (DICJ). Nonetheless, analysts are wary that ‘if smoking in premium mass areas is not possible, this could lead to a shift from premium mass back to VIP on the margin.’
‘Given the lack of clarity regarding the ban, we believe most have avoided estimating the impact on gross gaming revenue, leaving open the possibility of further downside estimate risk,’ the investment bank added in its note to clients. ‘Our revised estimates have not made allowance for the smoking ban.’

Copyright@Macau Business Daily