GGR to bottom out in Q2: Jefferies

Monday 8th of April 2019

The slowdown in Macau’s gross gambling revenue is expected to bottom out in Q2, with recent tax cuts and credit easing in China likely to help the market return to growth, analysts at Jefferies said in a report initiating coverage on the territory’s gaming stocks.

The analysts said they expect GGR to decline 1.1 percent in 2019, with VIP down 3.3 percent and mass market up by 6.5 percent. For 2020, Jefferies sees the market rebounding by 5.6 percent.

The report states that increasing levels of wealth on Mainland China will drive visitation to Macau.

“We believe the Chinese outbound tourism market is still underpenetrated despite Chinese

residential departures rising from only 10.5 million in 2000 to 162 million in 2018,” it said. “Despite this growth, only 11.6 percent of the population travelled abroad in 2018.”

This compares with 15 percent of Japanese, 55.6 percent of Koreans and 28.4 percent for the U.S., it said. Chinese visitors to Macau were only 1.6 percent of Mainland China’s total population.

Jefferies said an additional 240 million Chinese are close to the RMB3,500 personal mobility threshold that will increase outbound tourism.

In terms of Macau, the brokerage firm’s top pick is Sands China and Wynn Macau. The former due to its exposure to the mass market and non-gaming and the latter due to its strong VIP brands.

Jefferies initiated coverage of Galaxy Entertainment and MGM China with a hold.