Macau VIP revenue to drop 10 percent a year to 2017, UBS Says

VIP revenue in Macau is likely to decline 10 percent year-on-year from 2015 to 2017, leading to intensifying of competition with gross margins narrowing, UBS said in report.

The forecast decline comes against an anti-corruption and money laundering campaign by the Beijing government.

The report, assuming a medium-term negative growth scenario, was for VIP revenue in 2017 to be just 63 percent of 2013 revenue levels, while mass revenue would rise 10 percent year-on-year, with overall gross gaming revenue (GGR) falling 1.0-2.0 percent.

UBS expects revenue in Macau as a percentage of China's GDP to decline in 2017, reversing a trend of increasing penetration over the past decade or more.

Declining revenue is expected to lead to greater competition with mass gross margins compressing with higher non-gaming promotional costs.

UBS said a "consensus view" is that high-end demand (both VIP and premium mass) may be weak over the rest of 2014, with China President Xi Jinping set to visit in December, marking the 15th anniversary of Macau's handover. The visit is seen as being "politically sensitive".

The firm said Galaxy Entertainment and Melco Crown will still achieve double digit EBITDA growth. But MGM Resorts, Wynn Resorts and SJM Holdings would show flat to declining profits in 2015.

 

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