DECEMBER REVENUES TO DROP AT LEAST 26PCT, SAYS CREDIT SUISSE

2014/12/5

From：Macau Business

Tighter rules for transit visas and disruption from Xi Jinping’s visit will likely drive December gaming revenues down by almost 30 per cent. Casino stocks will suffer further blows this month, the Swiss bank warned yesterday

It’s by far the most pessimistic estimation for December until now. Credit Suisse predicts that gaming revenues in Macau could decline almost 30 per cent this month. The Swiss bank points out that tighter rules for transit visas and travel disruption caused by Xi Jinping’s visit here will probably keep gamblers away from Macau.
In a note to clients, Credit Suisse says the revenue trend for the coming weeks ‘could be disappointing’. For now, the bank’s estimation predicts a 26 per cent decrease in revenues in December year-on-year but with a ‘downside risk’, meaning analysts are anticipating a further decline.
Credit Suisse says it talked recently to several members of the industry here ranging from operators to junkets to premium mass marketing hosts, who ‘in general find it challenging to get players visiting Macau in the coming few weeks’. Two main reasons are driving the December decline, according to these industry sources. First, the tighter transit visa rule – ‘the players fear the record keeping at Zhuhai border gate on stricter travel documents inspection’. Second, less and tighter visa approvals around the time President Xi Jinping visits this month. These additional factors will probably divert a lot of players and tourists from Macau, with some not coming at all and others postponing their visit.

Stock crisis

If there’s any doubt about the material evidence of one of these factors, Credit Suisse said that just after the new rules for transit visas at the Zhuhai border gate were announced, Macau gaming stocks suffered a decline of 2 to 6 per cent with investors expecting the enforcement to reduce the number of players arriving to play at the city’s gaming tables.
The disruption with President Xi Jinping’s presence in Macau was already one of the main factors driving revenues down in December, according to several investors. Despite being less pessimistic than Credit Suisse, the market is assuming a very weak December for the Big Six here. Wells Fargo decided to revise down its estimations for the month from an 18 per cent drop to a 22 per cent decline year-on-year. Deutsche Bank expects casino revenues to go down 21.2 per cent, with the VIP segment falling 31.3 per cent and mass 6 per cent, including slots.
Credit Suisse warned its clients that despite gaming stocks from operators in Macau already dropping 8 to 18 per cent since November 5, new declines are expected as the bank maintains its ‘cautious view on the sector short run’. The shares will be negatively pressured by ‘upcoming disappointing December revenues, potential margin deterioration in 4Q14 not yet recognised by the market (more earnings downgrade may follow) and potential dividend payout cut on weakened result and entering into the heavy capex cycle into 2015’.

Copyright@Macau Business Daily