Inside Asian Gaming

INSIDE ASIAN GAMING | April 2013 12 M acau’s gross gaming revenue in March reached a new all-time monthly record of MOP31.3 billion (US$3.9 billion), up 25.4% year on year and 16.2% higher than the average monthly revenue recorded over January and February. After theChineseNewYear period (which ran from 10th–17th February this year), Macau daily gaming revenue has averaged out to MOP900 million–1 billion over the past six weeks. “We believe that this could become the new base for the sector,” wrote J.P. Morgan’s Kenneth Fong. “If we assume that the remaining dates of 2013 continue at the same rate of MOP950 million/day (i.e. no acceleration for the rest of the year), 2013 headline revenue growth would come in at 14%, which is already at the high end of consensus estimates.” Mr Fong believes, therefore, that the earnings risk as far as the Hong Kong-listed Macau casino operators are concerned is “on the upside.” The potential share price catalysts identified by Mr Fong are good results for the first quarter of 2013, strong revenues during the May “Golden Week” holiday period, and easier year-on-year growth comparisons from May onward. Other analysts were also quick to raise their forecasts for Macau’s gaming industry following the strong March headline number. David Bain at US-based brokerage firm Sterne Agee expects Macau to see six more all-time monthly gross gaming revenue records this year, and his 2013 gross gaming revenue growth forecast is 15%-16%. Union Gaming Research Macau analyst Grant Govertsen forecasts 16% growth, while Wells Fargo analyst Cameron McKnight expects “gaming revenue growth to continue to accelerate through the year on the back of an improving China macro environment, additional infrastructure, hotel and table supply, and easier comparisons.” Resurgent VIP sector Mass market table revenue accounted for 26% of total revenue in March and grew 30% year on year, continuing the robust growth it has enjoyed since last year and contributing strongly to industry profitability, given the much higher margins in the mass market relative to VIP. Slot revenue, meanwhile, made up 4% of the total in March and grew 6%. The main driver of the growth in overall revenue in March was the VIP sector, which comprised 70% of the total and surged 25% year on year, after having posted a modest 3% increase in Q4 2012 and 1% decline in Q3 2012. The robust March VIP performance brought the growth in the sector’s revenue to 10% for Q1 2013. A caveat, however, is that VIP growth in March was partly the result of a high industry-wide win rate, which stood at 3.38%, higher than the historical average of 3.1% and the 2.98% rate recorded in March 2012. VIP rolling chip volume was up a more modest 10% in March, though that is the strongest growth since April 2012. This appears to put paid to reports about a crackdown on junkets in mainland China. “Despite the anti-corruption talk and tighter regulation on gifting in China, Macau VIP revenue continues to hold up, signaling Back on a Tear Macau’s VIP sector appears to have returned to growth mode, though the mass market will continue to drive industry profitability over the coming year IN FOCUS