Macau market GGR will continue to face weakness: Bernstein

Sunday 6th of December 2015

Following the release of Macau’s November GGR in early November, representing a 32.3 percent decline year on year and the lowest monthly GGR in 5 years (since September 2010), Bernstein has released a November Review, explaining the key issues and thoughts on the current gaming landscape in the region.

Looking ahead, Bernstein's analysis expects that Macau market GGR may continue to face weakness through December and early into 2016. As with the previous report released earlier in November, Bernstein maintains their conviction that over the long-run, mass will be the structural driver of Macau’s growth from current levels. Their top picks remain Melco Crown and Sands China.

Bernstein also adds that VIP GGR remains weak as a result of junket rolling chip volume falling, with Galaxy, SJM and Melco Crown leading in this sector. Bernstein sees no near-term recovery in VIP gaming revenues due to the continuation of the anti-corruption campaign and the liquidity constrains.

For the month of December, Bernstein forecasts GGR to decline 23 - 25 percent year on year to MOP 17.4 billion to 17.8 billion.

In Deutsche Bank’s report on the first six days of December, Macau’s gross gaming revenue per day is down 28 percent compared to the first eight days of December in 2014. DB has also estimated GGR for the month in line with Bernstein’s forecast.

HSBS's Global Research believes the sluggish run rate in the last 1.5 months will likely continue to drive share price in the near term. Analysts prefer MGM China due to its long-term value and favourable risk profile. Galaxy is also preferred, as in the event of VIP recovery, they will be best positioned to capture the upside.

Citi Research adds "although the MOP16.4bn in GGR Macau generated in November 2015 was the worst in the last five years, Mass revenues continue to show resilience with MOP 9 billion in GGR.". VIP continued to deteriorate. "Unfortunately, the disappointing November GGR figure was again driven by VIP. Estimated November VIP GGR of only MOP7.4bn was the lowest in six years." Citi Research believes VIP will fall another 18 percent and mass will grow 10 percent in 2016.