No recovery in sight, says Invesco’s Paul Chan

Monday 25th of April 2016

Macau casino stocks have had their worst week since January, and there is no recovery in sight said Invesco Ltd’s Paul Chan, Bloomberg reports.

A Bloomberg Intelligence gauge containing Macau’s six casino operators dropped 5.5 percent in the five-day period, the lowest since January.

Chan said it wasn’t a good time for investors to go into the sector, especially since many have moved to the mass market, which is a low margin business.

“What recovery? I haven’t seen any recovery yet,” said Chan, the chief investment officer for Asia ex-Japan at Invesco. “Top-line revenue growth is not improving and they have moved to the mass market now, which is a low-margin business. I don’t think it is a good time for investors to go into the sector.”

Macau’s gaming revenue has been in a slump for two years now, with March marking the 22nd consecutive month of decline for the gaming hub.

According to data from the Gaming Inspection and Coordination Bureau, in March, gross gaming revenue was MOP 18 billion (US$2.3 billion), down 16.3 percent from MOP 21.5 billion in 2015

Accumulated gross gaming revenue for the first three months of 2016 was MOP 56.2 billion, representing a year on year decline of 13.3 percent for the same period in 2015.

However, some industry stakeholders have been more optimistic.

Earlier this month, Lionel Leong, Macau’s Secretary for Economy and Finance said he was unfazed by the first quarter gaming revenue figures, despite missing analysts estimates in March. Paulo Martins Chan, the director of Macau’s gaming regulator said he believes the decline in gross gaming revenue (GGR) should slow down this year.

“The most difficult times are now behind us. I think that, if there’s a decline this year, it will be a slight decline,” said Chan.

Alex Bumazhny, Fitch’s senior director in New York, predicts Macau gambling revenue will fall about 5 percent this year, according to Bloomberg.

“We expect some marginal growth going forward but as bigger projects open, there’s some danger that there could be cannibalization for existing properties,” he said.

Bricks & Mortar Decline Recovery Analyst GGR