IAG 2006-08-09 Aug-Sep - page 18-19

17
16
lthough theopeningof newcasinos
and tourist attractions in the first quarter
spurred April gaming revenue to jump 24%
year-on-year,growth inMayandJuneslowed
significantly. The key calendar event that
softenedMay growthwas the GoldenWeek
holiday inChina.
TheGoldenWeekholiday inthefirstweek
ofMayhadtraditionallybeenthepeakseason
formainlandChinese travelers tovisitMacau.
Thisyear,however,expensive room ratesand
packed tourist spots kept many mainland
visitors away. Chinese tourists now prefer to
spread their travelingevenly throughout the
year, leaving May 2006 visitation only 11%
higher year-on-year –well below the year to
date growth of 18%. Visitor arrivals in June
alsogrew11%,bringingyear todategrowth
to 17%. As of end-June, 10.4million visitors
haddescendedonMacau in2006.
Thebulkof visitorshailed frommainland
China (50%), Hong Kong (30%) and Taiwan
(7%). Same day visitors represented 51.6%
of total arrivals, while approximately 45.3%
ofmainlandChinesevisitors cameunder the
eased travel restrictionsof the IndividualVisi-
tor Scheme (IVS).
Visitor growth could remain subdued
in the third quarter as the summer will be
another dull quarter in the casino opening
pipeline.Thankfully,the lowbaseof compari-
son set by theweakperformance in July last
year – when gaming revenue declined 11%
year-on-year – should be easier to beat. Key
sector risks includea slowdownandpossible
monetary tightening in the Chinese econo-
my,anddisruptions to travels.
GoldenWeek, World Cup tough onQ2
June’s growth of 7% year-on-year was well
below the year-to-date growth of 14%. We
believe the low Junegrowth couldbeattrib-
uted to two factors. Firstly, therewas a brief
lull in the casino resort pipeline, before the
high growth phase kick starts in the second
half of the year. Secondly, the World Cup,
whichbegan inmid-June,divertedgambling
activity to sports betting, particularly in the
VIP segment. VIP baccarat revenue fell 3%
year-on-year in the secondquarter, and con-
tinued tobeadragonoverall growth.
The soft results could put stocks under
pressure inthenearterm.Long-term investors,
however, couldbuyondips as stronggrowth
should resume in the fourthquarter after the
openingofWynnMacauonSeptember6.
2Q growth driven bymassmarket
Growth in the second quarter of 2006 was
driven mainly by an expansion in the mass
market segment,which continued tobenefit
from theopeningof new casinos and tourist
attractions in2006.Massmarket gaming rev-
enuewasup37%year-on-year toUS$0.67bn,
in linewithour full-year expectations of 35%
growth, while the VIP segment witnessed a
marginal 3% decline in revenue growth to
US$ 0.90bn.We believe this could be the re-
sult of theWorldCup effect and certain casi-
nos and cruise ships in South East Asiaoffer-
ing“remotegamblingvia livevideo link.”This
implies that high-rollers no longer need to
travel toMacau togamble,andcannowplace
their bets from other locations. Despite the
slowdown,westillmaintainour full-year fore-
castof2%growth for thehigh-rollermarket.
Due to its stronger growthmomentum,
themass market segment captured 43% of
total Macaugaming revenues in the second
quarter, up from 34% in the second quarter
of2005.Conversely,theVIPsegmenthasseen
itsmarket sharedrop9percentagepoints to
57% in the secondquarter of this year. Slots
remain a tiny portion of gaming revenues,
edginguponepercentagepoint to 4%over
the sameperiod.
Average tablewinUS$8,800 per day
Macau added 277 tables in the second
quarter to a total of 1,925,mainly due to ca-
sinoopenings (GalaxyGrandWaldo) and the
Sandsexpansion.This representsa55%year-
on-year increase in table supply.With such a
big increase insupply,unit table revenuewas
diluted 28% year-on-year from US$12,200/
table/day in the second quarter of 2005 to
US$8,800/table/day in the corresponding
quarter this year. On a sequential basis, the
dilution is equal to 13% quarter-on-quarter.
With a full pipeline of new casino openings
over thenext twoyears,weexpect thisnum-
ber to be further diluted toUS$4,600/table/
dayby2008.This is still almost2x thecurrent
LasVegasaverageofUS$2,600/table/day.
In addition,Macau faces awide discrep-
ancy in tablewin between its VIP andmass
market segments. We estimate that in the
second quarter of 2006,VIP tables averaged
US$18,700/table/day, and mass market ta-
bles averagedonly a quarter of that, around
US$4,700/table/day.
Slots –Market acceptance increasing
Macau added 310 slot machines in the sec-
ond quarter of 2006 to total 4,533. Despite
this 64% year-on-year jump in slot unit,win
per slot machine remained relatively stable,
down only 7% year-on-year to US$136/ma-
chine/day in the second quarter. This sug-
gests that the Macau market is embracing
the newdevelopments in slots,which could
eventually contribute a lotmore to the total
gaming revenue as the mass market devel-
ops. For full year 2006,we expect slotwin to
remainat aroundUS$140/machine/day.
Industry demand and supply
Weexpect theMacaumarket todouble from
US$5.6bn in 2005 to US$11.4bn in 2009. In
other words, it would grow at a compound
annual growth rate (Cagr) of 19%.Due to the
distinctdifferencebetween thehigh-roller
Macau2QTrends
TheWorldCup and a lull in new casino openings led to soft gaming revenue growth inMay and June,
but DeutscheBank’sKaren Tang expects growth to return to its strong track from the fourth quarter
New supply on theway
Quarterly gaming revenue by segment
1.60
1.40
1.20
1.00
0.80
0.60
0.40
0.20
0.00
(US$bn)
1Q05
2Q05
3Q05
4Q05
1Q06
2Q06
34%
66%
34%
66%
39%
61%
68%
42%
42%
58%
43%
57%
VIP
Slots
Massmkt
Source: Gaming Inspection&CoordinationBureau, DSEC
80%
60%
40%
20%
0%
-20%
2004
2005
1Q06
2Q06
2006F
2006-08FCagr
Gaming revenue (yoy change)
44%
34%
75%
11%
-3%
45%
17%
3%
44%
12%
-3%
37%
16%
2%
35%
20%
4%
38%
Source: DeutscheBank
50%
40%
30%
20%
10%
0%
-10%
-20%
Jul-05
Sep-05
Nov-05
Jan-06
Mar-06
May-06
Monthly gaming revenue (yoy change)
-11.0%
18.2%
9.5%
3.7%
0.2%
10.8%
42.9%
16.1%
-4.6%
24.3%
3.7%
6.8%
YTD
Source: Gaming Inspection &CoordinationBureau, DSEC
A
1,2-3,4-5,6-7,8-9,10-11,12-13,14-15,16-17 20-21,22-23,24-25,26-27,28-29,30-31,32-33,34-35,36-37,38-39,...52
Powered by FlippingBook