Macau’s casino revenue plunged by more than some analysts estimated, a sixth straight month of decline, as the government’s campaign against lavish spending by officials discouraged gambling by high rollers.
Casino revenue in the city fell 19.6 percent to 24.27 billion patacas (USD3.04 billion) in November, according to Macau’s Gaming Inspection and Coordination Bureau. This compared with the median estimate of a 19.3 percent decline from eight analysts surveyed by Bloomberg News. Shares of casino operators fell in Hong Kong.
The previous longest losing streak was recorded between 2008 and 2009 when revenue dropped for seven consecutive months as a global credit crisis sapped demand.
“People aren’t expecting a significant break from the current trend in the near term,” said Victor Yip, an analyst at UOB-Kay Hian Holdings Ltd. High rollers will avoid trips to Macau ahead of Chinese President Xi Jinping’s possible visit to the city this month, he said.
The world’s largest gambling hub saw its biggest drop in history in October. The 23 percent decline came off a high base as October 2013 was the second-best month on record. Xi’s two- year campaign against extravagance as well as a weaker Chinese economy have dented earnings at operators including Wynn Macau Ltd. and Melco Crown Entertainment Ltd.
SJM Holdings Ltd., whose shares have risen more than ninefold since 2009, is heading for its first annual decline this year, dropping 41 percent as of today. A decline would be the first since 2009. The stock fell 1 percent today.
Galaxy Entertainment Group Ltd. led declines in casino stocks, falling 2.6 percent at the close of trading in Hong Kong. Sands China Ltd. dropped 2.1 percent, while MGM China Holdings Ltd. declined 1.3 percent and Wynn Macau slid 1.4 percent. Melco Crown was the only company that rose with a 0.6 percent gain.
Macau reported last week its first year-on-year economic contraction since 2009 in the third quarter as Xi tackled corruption and lavish government spending. Gross domestic product fell 2.1 percent from a year earlier, it said.
SJM Chief Executive Officer Ambrose So said earlier this month he’s bearish about Macau gambling revenue from high rollers over the next six months and expects industrywide gaming revenue to be flat or drop slightly this year. He forecast “high single digit” growth for 2015.
A decline in casino revenue this year would be the first since the city started recording the figure in 2002.
Revenue in the gambling hub, which has grown 0.3 percent this year, may fall 0.6 percent year on year, according to a median estimate of nine analysts surveyed by Bloomberg News as of Nov. 12. The market may rebound to a 2 percent growth next year, according to a median estimate of 12 analysts surveyed.
Macau is extending hours of operation and making it easier to enter the special administrative district from neighboring Zhuhai city. A key bridge will begin 24-hour operations in the middle of this month.
The moves may increase the number of gamblers and the amount of time they spend at tables, Citigroup Inc. analysts led by Anil Daswani wrote in a note to clients. Billy Chan, Bloomberg
SJM, Sands China and Galaxy top the market
Data compiled by Lusa shows that the Sociedade de Jogos de Macau ended November at the top of the gaming operators ranking with just over 22.5% of the market share, a tenth of a percent above Sands China, and roughly one percentage point ahead of Galaxy Resorts. In the second half of the table comes Melco-Crown which stayed in fourth place with about 13.5 pct of the share, followed by MGM with almost 11 pct, and North American Wynn Resorts dropping back to last place with almost 9 pct.
‘We all got this massively wrong’
According to the Wall Street Journal, November’s sharp economic decline means that Macau will see its first calendar-year drop in gambling revenue since 2002, which is as far back as public records go. WSJ cites Standard Chartered Equity Research analyst Philip Tulk in saying, “We all got this massively wrong. Nobody saw this coming.” Mr Tulk said that a year ago he had pegged Macau’s gambling revenue to rise 14 pct in 2014 and that earlier that year had even raised his forecast by a few percentage points as money continued to pour in. He and other analysts are predicting revenue in the territory will fall by at least 1 pct in 2014 compared with 2013.
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