Citi predicts 20 pct drop in November

Citi Research yesterday cited its industry sources indicating that Macau table GGR for the first 16 days in November reached MOP12.3 billion (or MOP12.9b, including an estimated MOP640m in slot-related revenue).
Total daily GGR run rate over last week equated to MOP760m per day, lower than the daily run rate of MOP846m/day in the first nine days of November.
The research house suspects Macau suffered a double-hit with the Grand Prix affecting mass (particularly in Peninsula) and bad hold affecting VIP.
Citi believes mass GGR will recover after Grand Prix, but it lowered its November GGR forecast to MOP24bn (-20% YoY), conservatively assuming the remainder of the month to track at month-to-date daily run rate.
In overall, investors remain cautious about investment in Macau, after total casino revenue fell 23.2 percent to MOP28b (USD3.5 billion) in October, dropping for the fifth month in a row.
This week, analysts at Fitch Ratings Service predicted zero growth in Macau’s gaming revenue by the end of 2014 and an overall decline of 1 percent in 2015.
“Fitch’s forecast reflects the persistent weakness in the VIP business, which seems to be spilling over to the premium mass segment,” explained analyst Michael Paladino, cited by the Las Vegas Review-Journal.
According to Paladino, the market will recover in the second half of next year, with Galaxy Entertainment’s expansion of the Galaxy Macau, and Melco Crown’s opening of Studio City. “Our 2015 forecast may prove overly conservative if VIP bounces back to recent historical averages,” Paladino said.
However, the analyst remains optimistic about long-term investment in Macau.
“Despite these setbacks, we do remain positive about Macau, as we believe that Macau and the greater China market remain underpenetrated (…) We expect gaming revenue growth will be driven by new supply and infrastructure development, and that the Chinese economy will continue to grow, anchoring mass-market demand.”
Cameron McKnight, gaming analyst for Wells Fargo Securities, predicted this week that revenue will decrease another 18 to 21 percent during November. “We are staying on the sidelines regarding the Macau market, as we believe China’s policy settings are negatively affecting growth,” he said.
David Bain, a gaming analyst working for wealth management and investment bank firm Sterne Agee observed that the “Macau Grand Prix auto race would hurt high-end gambling revenue during November but could actually provide a small boost to gaming revenue overall.” He added that the anti-graft campaign and challenges facing the Chinese economy are likely to change the market.