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Macau rebounds with May growth

Tue, Jun 4, 8:57am by Staff Writer

Macau casinos returned to growth in May, yet the modest revenue gain is a sign that the city still faces headwinds from regional competition and trade war uncertainties.

Macau Daily Times is reporting that gross gaming revenue in May grew 1.8 per cent from a year earlier to reach MOP25.95 billion, according to data provided by the Gaming Inspection and Coordination Bureau.

Coming in lower than the median analyst estimate of 3 per cent increase, the marginal growth interrupted two consecutive months of decline, but was still not enough to offset the contraction in year-to-date revenue.

Between January and May, Macau recorded gross gaming revenue of MOP25.69 billion, or 1.6 per cent less than the equivalent 2018 period.

However, at almost MOP26 billion, the month of May has proven to be the biggest earner of the year to date, narrowly ahead of March’s MOP25.84 billion.

Its closeness to the monthly average of MOP25.13 billion is a sign of market stabilisation.

The outlook is mixed for June though.

June has been a consistent poor performer in recent years, recording the second lowest monthly take in both 2018 and 2017, and the lowest in 2016.

But, given the low comparison base, a take of just MOP24.5 billion in June would translate into enough year-on-year growth to round out the first half of the year net zero over 2018.

A slowing Chinese economy and trade war have loomed over Macau this year, ending more than two years of uninterrupted revenue growth as the high-roller segment has weakened.

The stagnant results reinforce another trend that is worrying analysts: many high rollers are being lured away by attractive rival gaming spots.

According to Bloomberg, as the trade war with the US drags on, analysts are not optimistic for the rest of the year.

While the mass-market segment has shown some strength, analysts still forecast an overall drop in revenue for the full year, citing geopolitical uncertainty.

Meanwhile, Macau casino stocks have been dropping amid the more pessimistic outlook.

The Bloomberg Intelligence index of Macau casino stocks slide 20 per cent in May, for the biggest monthly decline since September 2015.

The worst performer was Wynn Macau Ltd, off 26 per cent.

For the year, the industry gauge is up 3.2 per cent.

As the special administrative region marks 20 years since its handover from Portuguese rule, slower mainland economic growth, a weaker yuan and a simmering trade warm threaten to derail growth.

For operators in China’s only legal casino hub, the outlook remains challenging as Beijing pushes to rebrand Macau as a family-friendly destination.

They are plowing about $10 billion into mostly non-gaming attractions before their licences expire in 2022 amid warnings new permits will be linked to efforts to diversify.

VIP high rollers still attractive to casinos

Australia’s top casinos are in a tug of war to lure back wealth Asian high-roller gamblers.

Sydney Morning Herald is reporting that the casinos are persisting with gamblers from Asia despite China’s economic slowdown but analysts are now “optimistic” about the chances of a recovery in the next financial year.

As China recorded its slowest rate of growth in nearly three decades, partly driven by trade tensions with the United States, Australian casino giants including Star Entertainment and the James Packer-backed Crown Resorts have experienced a sharp pullback in turnover by super rich Chinese tourists, denting profits.

Crown told its investors in February that turnover from its VIP program had shrunk 12.2 per cent to $19.9 billion, driving down company profits over the final six months of 2018.

At Crown’s flagship casino in Melbourne, turnover was down 11.2 per cent to $17.3 billion.

The company’s after-tax profit had risen less than 1 per cent to $194.1 million, short of forecasts by Macquarie Research ($203 million) and JPMorgan ($221 million).

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