Gaming | 2018 finishes strong at 84 percent of pre-crash peak

A croupier turns a card on a baccarat table at an X Pro Gaming booth at the Global Gaming Expo (G2E) inside the Venetian Macao resort and casino, operated by Sands China Ltd., a unit of Las Vegas Sands Corp., in Macau, China, on Tuesday, May 20, 2014. The gaming expo runs through May 22. Photographer: Brent Lewin/Bloomberg

Gross gaming revenue finished stronger than expected in December, leading 2018 to conclude with a full-year tally of MOP302.85 billion (USD37.57 billion), a 14 percent year-on-year growth over the MOP265.74 billion seen in 2017, according to official data released by the Macau Gaming Inspection and Coordination Bureau.

With this second consecutive year of growth since the 2014 recession, full-year earnings for 2018 stand at about 84 percent of the MOP360.75 billion brought in at the 2013 peak. In comparison, the 2017 annual take represented less than 74 percent of the peak.

Macau experienced three consecutive years of annual decline prior to 2017 that wiped more than a third off annual revenues at its lowest point.

Gross gaming revenue for December rose 16.6 percent year-on-year to just under MOP26.5 billion, making it the third-strongest monthly take this year after October and August and the highest-earning December since 2013.

The final month of the year has historically been a poor performer.

Analysts this year initially forecasted a moderate increase of about 11 percent for the month, according to a Bloomberg aggregate survey, but that was revised two weeks ago due to mid-month indication of strong channel checks in the mass market segment. The mid-month indicators showed that the VIP market was also trending slightly higher than in the previous month.

Accordingly, brokerage Sanford C. Bernstein revised its initial estimate of 8 to 10 percent year-on-year growth to the 12 to 15 percent range. Meanwhile Japanese rival Nomura said it expected 10 to 15 percent, and monthly revenues to tally between MOP25 billion and MOP26 billion.

The 2018 posting is a sign that Macau’s economy is becoming more resilient to macroeconomic changes on the Chinese mainland, including a slowing rate of economic expansion and the potential for spillover from the China-U.S. trade war.

These factors will continue to weigh on Macau into next year, with an impact expected on both the VIP and mass market segments.

At the same time, the local government will be expected to reveal some information regarding the upcoming casino licensing process, if not beginning the process outright. The first batch of the six concession agreements is due to expire in 2020, while the others will last only until 2022.

With all this in mind, analysts say they are cautious for 2019.

Union Gaming Securities Asia warned that it expected a “slow start” to the year, given the timing of the lucrative Chinese Lunar New Year in early February. The firm said in a note cited by GGR Asia that it would “not be surprised if January was flattish and February was up in the mid/high single digits.”

Meanwhile Sanford C. Bernstein is forecasting 2019 revenue to hold stable, either growing or declining by about 2 percent by year-end.