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Macau GGR headed for 1-5 percent increase: analysts

Macau gross gaming revenue for the month of September is headed for a year-on-year increase, with analysts predicting an increase between 1-5 percent.

According to a note from Bernstein on Monday, GGR during the week ending Sept. 25 was weaker than anticipated.

“Our channel checks indicate that Macau's GGR (gross gaming revenue) month-to-date is ~MOP 15.2 billion ($1.9 billion)… The results last week were weaker than we had expected and have materially weakened from early September,” said the brokerage.

The brokerage, assuming an ADR of MOP 510 - 560 million for the remainder of the month, forecasts September GGR to be in the range of MOP 17.8 - 18 billion, representing a year-on-year increase of 4 - 5 percent.

“Due to a ramp up of new projects and better than expected VIP, September GGR should still be better than previous years compared to a 5-year historic average m/m decrease in September of -6 percent,” said Bernstein, adding that slowing VIP volume is to blame for Septembers weak second half.

“The weaker than anticipated GGR figure in the second half of September is likely largely driven by slowing VIP volume, after the larger than expected boost in VIP volumes following the Wynn Palace opening.  Without real market share breakdowns by operator or VIP/Mass splits, the weekly GGR numbers need to be taken in light of what they are – directionally valuable, but not to be heavily relied upon for investment decisions,” it said.

On the other hand, Wells Fargo in a note on Friday said that VIP was “driving the recent pop in revenues - not mass.”

“Our checks suggest September mass market revenues are pacing down mid-high single digits, in line with regular seasonality. August revenues were better than expected, picking up in the last 5 days of the month, and some channel checks suggest September started strongly. Based on our checks, we think the recent pop in revenues has all been driven by the VIP segment, and not an increase in mass and premium mass traffic and play. The new VIP rooms have seen additional credit extended to junkets, incenting play. VIP business is inherently volatile week-to-week and month-to-month, especially on today’s much smaller customer base,” said the analysts.

Buckingham Research analysts also wrote a similar note on Monday, noting strong VIP demand at Wynn Palace, and improving mass performance at the Parisian.

“We believe that the overall market is benefiting from recent new openings in the market, with especially strong VIP demand at Wynn Palace and improving mass market performance at the Parisian.”

Its analysts are forecasting a flat GGR increase for the month, at 1 percent year-on-year.

“We believe there could be upside to these expectations as the Parisian and Wynn Palace continue to ramp up, offsetting what is traditionally a slowdown in volume in late September. Importantly, we believe the sector continues to grow into what some market prognosticators believe is an over extended market, with stretched valuations,” noted its analysts.

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