Sterne Agee sees continued headwinds from construction

Macau’s August gross gambling revenue is likely to have fallen between 2 and 6 percent and may remain soft as construction on casino floors to comply with new smoking regulations disrupts play, Sterne Agee said.

According to the firm’s channel checks table-only GGR from Aug. 1 to August 24th was MOP21.9 billion ($2.7 billion). The run rate indicates a 4 percent year-on-year decline, it said. As a result Sterne Agee has trimmed its August forecast from its previous estimated range of a decline of 3 percent to a gain of 2 percent.

The firm noted there had been an acceleration in the decline to a drop of 9 percent in the final week in the period. It said the drop was due to softer VIP volumes, but also construction disruption on mass floors as casinos reconfigure to comply with a ban on smoking, which takes effect in October.

In the second half, Sterne Agee continues to expect headwinds, but says most of the issues are not systemic. It sees 2014 as a transition year and expects growth to pick up once new supply in Cotai begins coming on stream from next year.

Nevertheless, it concedes issues such as an ongoing cooling off in VIPs, the smoking ban, VIP operators spreading capital to other regions and political protest may trigger a downward revision of its forecast for GGR growth of 5 percent this year.  

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