Zona de Azar China – Analysts Revise Their 2019 Macau Outlook to Marginal Growth

China.- March 12th 2019 www.zonadeazar.com Analysts Morgan Stanley and Nomura have both revised their position on Macau’s casino revenues believing now that GGR will grow now rather than shrink in 2019.

Morgan Stanley said it is ‘incrementally turning more positive’ about Macau’s next financial year and has revised its outlook predicting now that GGR will increase by one per cent in 2019, rather than fall by two per cent due to improvements in mass market gaming which it now sees growing by seven rather than two per cent.

It said there would be: “We are incrementally turning more positive – leading macro indicators are suggesting GGR improvement from the second half of 2019. Some concerns – licence issues, slow GGR in the first half of 2019, and mid-cycle valuation – keep us from turning outright bullish. Tightened liquidity, full smoking ban pressuring VIP and premium mass growth in 2019, and potential decline in earnings before interest, tax, depreciation and amortisation year-on-year growth in the first quarter of 2019 [will impact GGR.]

“While mass growth has slowed down to single-digit year-on-year growth in the first quarter of 2019, improving visitation could ensure continued mass growth over the medium term. Risk is also rising, with mid-sized junkets folding and ongoing consolidation at the top.”

Nomura has changed its prediction of a three per cent downturn and now is now looking at growth of between one and four per cent.

“Considering the fourth-quarter and year-to-date GGR, we believe that 2019 growth will settle in a range of one per cent to four per cent. One per cent is consensus, but four per cent growth is possible if GGR volumes follow the recovery in key China economic indicators. With green shoots now sprouting in China, VIP volumes could be flattish this year.”
It is forecasting growth of one per cent in VIP gaming and even per cent in mass gaming.

It added: “If Beijing continues to foster credit and liquidity growth through 2019, then GGR growth could approach mid-single digits. The governing factor might be additional regulatory efforts at controlling currency flight, but, so far, players seem to find creative ways to access capital.”

February’s GGR in Macau increased by 4.4 per cent to US$3.14bn.

Union Gaming’s Grant Govertsen: “The timing of Chinese New Year (CNY) should have, in theory, benefited this year. Based on our on-the-ground observations, and given robust foot traffic trends, it appears that mass market came through for operators and growth of this segment likely remains in the low double digits. VIP likely dipped into negative territory on a market-wide basis, although certainly mixed at the operator level. On a GGR/day basis, February was MOP906m or the highest level since the fall of 2014.”

Edited by: Zona de Azar Press www.zonadeazar.com