Gaming | Analysts expect strong visitation won’t translate into growth

Analysts are not expecting much from gaming revenue growth this month after gloomy April disappointed amid soaring visitation in the special administration region.

Bank of America Merrill Lynch this week issued a note suggesting Macau’s VIP segment remains weak, but that the strong visitation would aid earnings in the core mass segment.

Meanwhile, Citigroup yesterday affirmed its MOP25 billion gross gaming revenue forecast for the month. Citing sector sources, the broker estimated that casino revenues reached MOP11.7 billion for the first 13 days of May, with a daily run rate of MOP775 million in the past week. Extrapolated to the month-end, the daily run rate suggests a target of between MOP25 and MOP26 billion. However, considering macroeconomic volatility, the firm holds the gross gaming revenue forecast unchanged.

Analysts at Nomura appear to agree, forecasting flat revenue growth in May. They suggest that monthly year-on-year comparisons during the second half of 2019 will provide a clearer picture of the state of Macau gaming than the ups and downs of the first half.

Macau recorded 10.36 million tourist arrivals during the first quarter of 2019, about 21.2% more than in the same quarter a year earlier, with the bulk of the increase carried by same-day visitors.

However, even the rapid rise in visitors was unable to overturn a 0.5% year-on-year contraction for the world’s largest gambling hub. That casts doubt on the overall ability of Macau to translate soaring visitor growth into gaming revenue growth.

Gross gaming revenue dipped 8.3% year-on-year in April – its worst month of the year to date – even as visitors soared as much as 40 percent over the Easter holiday period.

Tourist arrivals appear to be holding strong in May, according to official data provided by the Public Security Police Force. Thirty-seven percent more visitors were recorded at Macau’s border checkpoints during this year’s Labor Day holiday weekend, while the three-day holiday period for Buddha’s Birthday saw 48 percent more tourists come to the SAR compared with the equivalent period in 2018.