Macau’s casino market suffered during January in the first monthly gaming revenue decline in 29 months, but analysts didn’t seem overly concerned.
Some, in fact, thought the market would have seen a larger dip.
Gaming revenues declined 5 percent in Macau to $3.1 billion according to results released by the Gaming Inspection & Coordination Bureau Friday.
While some thought China’s economic slowdown might have deterred high gambling activity, leading to as much as a 9 percent gaming revenue decline, analysts said Macau was gearing up for Chinese New Year, which begins Tuesday.
“We are encouraged by the January results and view the market as being more robust than it gets credit for, especially given the timing of Chinese New Year this year,” said Union Gaming Group analyst Grant Govertsen, who is based in Macau.
“We were impressed with the January results (and) what seems to have been a fairly strong last week of January despite being in what is normally considered to be the pre-holiday slow period,” Govertsen added.
Macau saw its second straight annual gaming revenue increase in 2018, collecting $37.6 billion from gamblers, a 14 percent increase. The market is still far below the apex of $45.1 billion in 2013.
Analysts said in January that the two straight years of double-digit gaming revenue increases was probably over. January’s results seemed to support that thesis.
Jefferies gaming analyst David Katz said investors should look at Macau “in a measured manner” due to Chinese macroeconomic factors and any risk associated with the still-to-be-determined gaming license re-bid process.
“We view the historically low valuations as fair,” Katz said.
Stifel gaming analyst Steven Wieczynski said Macau typically experiences slowdowns before and the after national holidays. Also, casinos were dealing with the implementation of a newly-enacted smoking ban on casino floors.
He added that in January a year ago, Macau casinos saw a 36 percent increase in gaming revenue.
“Looking ahead to the remainder of 2019, we continue to forecast gross gaming revenue growth in the range of 2 percent to 6 percent,” Wieczynski said. “By and large we expect the VIP market to deliver a relatively flattish year-to-year comparison, with the mass market pacing growth for the market as a whole.”
Analysts said the market could also see disruptions from large-scale property renovations. Wynn Resorts said it was going to completely remodel of the Encore at Wynn Macau, while Las Vegas Sands will spend $1 billion to transform a portion of Sands Cotai Central into the Londoner Macau.
Last year, Macau benefited from the opening of MGM Cotai during February.
“We believe most investors view the combined January / February result as the more relevant metric, given the influence of the timing of Chinese New Year on the monthly results,” said Deutsche Bank gaming analyst Carlo Santarelli.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
