Morgan Stanley has joined other analysts in forecasting a Macau gaming slowdown this year, suggesting that gross revenue might shrink by as much as 2 percent. The downturn might begin with a decline in earnings of Macau casino operators during the first quarter.
In a note issued over the weekend, the stockbroking division of Morgan Stanley wrote that it had changed its industry view from “attractive” to “in-line” on the basis of “tightened liquidity, [the] full smoking ban pressuring VIP and premium mass growth in 2019, and potential decline in earnings before interest, tax, depreciation and amortization year-on-year growth in the first quarter of 2019.”
“While Macau is a structural growth story driven by low penetration and improving infrastructure, we see the cyclical slowdown continuing in 2019,” it continued, as cited by GGR Asia.
Gross gaming revenue finished stronger than expected last month, 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.
Morgan Stanley’s 2019 forecast is in line with that of other analyst firms, which last week estimated that gross gaming growth would hold stable this year or face a slight contraction.
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 that it would “not be surprised if January was flattish and February was up in the mid/high single digits.”
Sanford C. Bernstein has also revised its forecasts for 2019. Previously it expected 2019 to bring a 5 percent expansion to gaming revenue, but it now forecasts a 2 percent contraction, driven by negative VIP growth of 6 percent and moderate mass- market growth of 2 percent.
Analysts are concerned that the structural changes introduced by the full smoking ban will weigh on operators’ ability to retain gamblers at the tables.
Other factors that might affect this year’s revenue include any divulged information on the casino licensing process as well as the effects of a deepening China-U.S. trade war.
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