Macau VIP leakage not a result of ASEAN casino rise: MS

Monday 6th of May 2019

Lower VIP gaming tax and the improving quality of casinos in the ASEAN region will see more high-rollers trying their luck in casinos located in Cambodia and the Philippines, say analysts from Morgan Stanley.

In a report released last week, analysts from Morgan Stanley were investigating whether Macau’s lowered VIP gaming revenue was a result of cannibalisation from ASEAN region casinos.

“There are many reasons why VIP revenue in ASEAN countries is growing faster than that of Macau. First being lower tax,” said the analysts.

Across the ASEAN region, VIP gaming tax is much lower than that of Macau. Singapore is roughly 12 percent of revenue, Philippines at 15 percent and Cambodia at 2 percent, compared to Macau - which is at 39 percent of gross gaming revenue. This helps the casinos’ ability to pay higher commissions to junkets, said the analysts.

At the same time, the quality of casinos in the region have also improved significantly over the last few years, resulting in higher end VIP customers trying their luck in ASEAN-based casinos.

For example, NagaCorp, the owner of NagaWorld in Phnom Penh, saw its VIP revenue equal to 6.1 percent of total Macau revenue, putting it in the same ballpark as The Venetian.

Another example is made of SunCity, which saw 30 percent of its VIP revenue come from outside of Macau last year.

However, despite the impression that the ASEAN region casinos are stealing business from Macau, analysts said this is not the case.

“Cambodia and the Philippines VIP business have grown significantly in the last two years and might give an impression that they are taking share from Macau. However, if we add Singapore, Australia and Saipan, we realize that the percentage of VIP revenue from regions (other than Macau) has remained fairly stable at around 30 percent of the total VIP revenue in Macau.”

Thus, one can not blame overseas leakage for recent Macau VIP revenue growth slowdown. On top of this, the majority of VIP gaming revenue in the Philippines is proxy betting, which is not allowed in Macau and thus it is not a result of cannibalization. We conclude that Macau VIP revenue could remain resilient despite leakage to ASEAN countries and should recover in 2H19,” said the brokerage.