Nomura Predicts 12 Pct Gaming Revenue Growth For Macau In 2017

The uptick seen recently in Macau’s gaming industry is expected to get stronger according to Nomura, a brokerage firm.

Analysts at the Japanese brokerage have predicted that the 2017 Macau casino gross gaming revenue (GGR) will be around 12 percent, up from the previous 8 percent marking a 50 percent jump.

The firm said in its latest report that the VIP GGR in the first-quarter was likely to grow by 5 percent quarter-on- quarter as opposed to the earlier estimation that it would decline sequentially by 5 percent.

In a statement, Nomura analysts said

Macro improvements and subsided impact of the anti-graft campaign [in mainland China] continue to lift VIP demand. Strong VIP performance has led us to lift our 2017 full-year VIP and overall GGR growth estimates to 14 percent (from 2 percent) and 12 percent (from 8 percent), respectively.

Among the macroeconomic factors mentioned in the report, the most prominent is that property prices in China have seen a year-on- year growth of 10 percent in March 2017 as against the single digit decline experienced in March 2015. Property prices in China are typically taken by investment analysts to be a surrogate for VIP gaming performance, usually used on a trailing six month basis.

The assumption is that a strong property market indicates improved liquidity for Chinese high rollers who usually gamble with credit against properties from junket operators. Nomura has also indicated an optimistic outlook for the mass market segment. In its report, it stated that mass GGR increase would rise by 2 percent quarter-on- quarter to grow by 12 percent year-on-year.

The Daiwa Securities Group, another brokerage firm has made mention in a new report that the investment community has largely ignored the growth in mass market GGR in Macau. Commenting on the growth of mass market gambling, the firm’s analysts said that they expect the segment to grow by 10 percent year on year in the first quarter of 2017 which could be seen as a surprising development by the market.

According to Daiwa, gaming properties located in the Cotai area are likely reach an inflection point this year as a result of the pivotal Pac On ferry terminal possibly opening in May. The ferry will bring mass market gamblers directly to these Cotai resorts.

Brokerage Sanford C. Bernstein Ltd has announced that the new $1-billion hotel tower being developed in Melco Crown Entertainment Ltd’s City of Dreams called Morpheus will be hosting premium gaming gamblers rather than VIP gamblers, indicating the declining importance of high stakes gamblers.