Macau downside pressure greater than expected, Union Gaming says

Monday 12th of October 2015

The downside pressure on Macau's gaming industry was much greater than initially anticipated by analysts at Union Gaming, which now predicts gross gaming revenue will fall 33 percent this year.

UG's new GGR outlook is for VIP and mass to fall 42 percent and 19 percent, respectively, followed by very modest 2 percent growth in 2016 "which we believe is reflective of the relative strengths of Macau's primary customer segments in 2016."

"This is a touch more conservative than current consensus expectations that are calling for 5% total revenue growth in 2016."

UG said it "grossly underestimated" the effects of Macau policy, how sharp the continued declines in VIP would be, "and how fiercely competitive the hunt for Chinese wallet-share had become on a worldwide basis."

UG says Macau's recovery will be more policy driven than initially anticipated and will likely take longer too as VIP, "likely has another near-term leg down."

"While any supportive measures from Beijing (e.g. relaxations to the IVS visa policy) will take some time to work through the system."

In a note earlier this week, Sterne Agee said its October GGR forecast remains between 28 percent and 31 percent YoY – “which would mark the best “less bad” GGR result since January CY15 (a general monthly trend we expect to continue into next year).”

Wells Fargo analyst Cameron McKnight estimates October Macau gaming revenues to decline 24 percent to 28 percent YoY, compared to its prior estimate of 30 percent to 34 percent.