Gaming | Analysts offer gloomy January outlook

Brokerage Sanford C. Bernstein has warned that January gross gaming revenue could contract by as much as between 8 and 12 percent year-on-year. If correct, the prediction would mark the first monthly decline in growth since the gaming recession ended in mid-2016.

Gross gaming revenue in January 2018 amounted to MOP26.26 billion, representing a whopping 36.4 percent year-on-year rise. Curiously, the Chinese Lunar New Year – one of the most lucrative weeks in the Macau’s gaming calendar – fell in mid-February last year.

Should this month see a decline of between 8 and 12 percent, as suggested by Bernstein, January gross gaming revenue would fall in the range of MOP23 billion to MOP24 billion. That would represent a significant slowdown from the average monthly revenue of MOP26.26 billion recorded during the last quarter of 2018, falling more in line with the average monthly take in the same quarter a year earlier.

Based on the average daily rate for the week of January 7 to 13, Bernstein analysts wrote that revenues at Macau’s casino operators were being weighed down by “continued enforcement of the smoking ban; the crackdown of the illegal point-of-sale scheme; and visitation slowdown in anticipation of the Chinese New Year in early February,” according to a report from GGR Asia.

With regards to the illegal point-of-sale scheme, Bernstein analysts were referring to an alleged plot to have moved about USD153 million from China to Macau, circumventing the mainland’s currency controls.

Japanese brokerage Nomura offered an alternative perspective for January gross gaming revenue, suggesting that it could hold flat or see as much as a 5 percent contraction. According to GGR Asia, the firm said that U.S. operators might be less affected by the point-of-sale issues “as they tend to be stricter enforcers of the regulations.”

Gaming analysts previously offered conservative views for the first month of 2019, suggesting that the timing of the Chinese Lunar New Year would shift earnings into early February.

Union Gaming Securities Asia warned that it expected a “slow start” to the year and said it would “not be surprised if January was flattish and February was up in the mid/high single digits.”

Meanwhile, JPMorgan said it remained bullish on Macau and recommended holding shares of the city’s casino operators even with the expected dip in gaming revenue this year. “Most of the negatives are well-known and already (if not overly) priced-in,” it said, according to investment media, adding that operators demonstrated their resilience to macroeconomic developments on the mainland last year.

However, Bernstein’s latest forecast is the most pessimistic since late gaming recovery began in mid-2016. As the Times reported earlier this month, full-year revenue for 2018 amounted to about 84 percent of the MOP360.75 billion brought in at the 2013 peak, up from 74 percent in 2017.