Macau June GGR likely to dip, UBS, Sterne Agee say

Sterne Agee said it has reduced its outlook for June gross gaming revenue in Macau, though it said it expects a pick up in late July on the back of pent up demand after the World Cup.

The firm said the run rate in June GGR, based on channel checks through to June 22, is down 4 percent at $3.4 billion, including slots. It has reduced its outlook for the month to a dip of between 2 percent and 6 percent, from a range of a drop of 2 percent to positive growth of 3 percent previously. The full-year forecast remains unchanged for growth of 11 percent.

“This once in every 4 year disruption to GGR does not change our long-term secular outlook and we would use any corresponding stock weakness as a buying opportunity,” it said in a note.

During the last World Cup June GGR dropped 20 percent from May. Assuming a 20 percent decline this time around, June GGR will be down 8 percent year-on-year, it said.

“We believe post-World Cup pent-up demand positively influenced the back half of July 2010 and we expect a similar trend this year,” it said, though warned that the impact may be mitigated by high year-on-year comparisons.

Sterne Agee said so far, SJM Holdings appears to have consolidated its leading market share at 25.5 percent, compared with nearest rival Las Vegas Sands at 22.6 percent. Galaxy Entertainment stands at 20 percent, Melco Crown at 11.1 percent, Wynn Resorts at 9.8 percent and MGM Resorts at 11 percent.

UBS in a separate note said it expects June GGR to be flat to down single to mid-digit. The firm said the current trends are consistent with mass market growth of around 25 percent to 30 percent year-on-year and for VIP revenue to be down double digits.

For the full-year, the investment bank sees 10 percent headline growth. UBS recently recently revised down its 2014 and 2015 VIP growth forecast to 2 percent and 3 percent respectively, as the sharp downturn in industry VIP volumes since late March has been larger than it had anticipated.

 

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