Inside Asian Gaming

inside asian gaming November 2016 32 casinos, for example – more transparency on table grants and what CLSA calls “earlier clarity on concession renewals,” as expirations begin in 2020. The investment bank also recommends cutting VIP revenue tax to keep Macau competitive with other destinations. CLSA admits some recommendations are longshots. THE NEXT NORMAL Back in the present, the holiday period plus Premier Li Keqiang’s visit to Macau and Typhoon Haima made October unique. Months ahead Feature In Focus will better indicate whether Macau has turned the corner. “Gaming revenues have stabilized but need to grow on a month- over-month, seasonally adjusted basis for investors to conclude a recovery is underway,” Wells Fargo’s McKnight, whose bank remains neutral on Macau gaming, says. “Visitation growth has been negative and needs to turn positive for new supply to be absorbed. China macro data has been mixed – growth has been slowing but in the short term, credit growth and house prices have picked up – investors are asking whether this is a short-term phenomenon or something that could be sustained. We estimate [Macau’s] advertised hotel rates are down 20% year on year in Q4 – reflecting the impact of additional supply in a slow demand growth environment.” “It feels like there is a mass market recovery underway, although the true test is likely to be whether or not Parisian Macao grows the market,” Union Gaming’s Mr Govertsen says. “Simply put, the key will be growth. No more, no less. If the market continues to grow nicely – ie as good as, if not better than, September’s rate – then it is likely that investors will declare a recovery truly underway and we would expect upward pressure on certain stocks, especially those with an outsized mass market segment.” University of Macau Associate Professor of Business Economics, Ricardo Siu, adds, “Technically speaking, November and December may likely show positive year-on-year growth because of the low bases of these months in 2015. Along with the overall change, I would watch changing VIP volume and the reaction from the government.” Beyond that, the gaming expert says, “In the long-run, successful transition to the mass market with the right market positioning will be necessary for sustainable growth.” “The gaming and arrival numbers suggest additional overnight guests represent a new group of visitors being drawn to Macau, rather than day-trippers, whose average stay is less than five hours. That emerging visitor segment could form the base for a mass market centered recovery in this transitional period for Macau.”