Macau casino profit seen to fall as Xi’s visit crimped arrivals

Macau casino operators are expected to show quarterly profit declining about 2.5% when they start reporting results this month, according to analysts’ forecast.

Three out of six operators are seen posting year-on-year declines in earnings before interest, tax, depreciation and amortization for the quarter ended December, according to a Bloomberg survey of seven analysts.

The past year was particularly challenging for the industry as it faced trade war uncertainty, a slowing Chinese economy, escalating protests in Hong Kong and a crackdown on cross-border gaming that squeezed junkets and the VIP sector.

The last quarter was further crimped by President Xi Jinping’s visit. Gaming revenue declined 8% in the quarter compared with a year earlier, according to data from Macau’s Gaming Inspection & Coordination Bureau.

Wynn Macau Ltd. is expected to post the largest profit drop due to its higher reliance on the VIP segment. SJM Holdings is seen reporting the strongest earnings growth after they had a financial issue with a satellite casino resulting in a low year earlier comparison.

The gross gaming revenue contraction will soften and stabilize in the first half before moving to low double-digit growth in the second half of the year amid improved sentiment following the U.S.-China trade deal, a more stable yuan, and increased liquidity, Bernstein analyst Vitaly Umansky wrote in a Jan. 17 report.

The Bloomberg Intelligence gauge of Macau casino shares rose nearly 19% in the December quarter compared with an 8% gain in the Hang Seng Index over the period.

Macau gross gaming revenue slipped 3.4% in year-on-year terms last year to post the worst annual decline since 2015. Accumulated gross gaming revenue stood at 292.45 billion patacas in 2019, with much of the year-on-year slowdown felt in the final quarter.

The 2019 revenue drop interrupted three prior years of consecutive growth that had seen Macau recover much of the ground lost after the 2014 gaming slump. DB/Bloomberg