Deutsche Bank has revised its forecast for the gaming industry in 2015 from a decline of 25.9 per cent to 28.5 per cent, after it was made public that gaming revenues nosedived 38.8 per cent in April. According to the report, the Macau gaming sector is now expected to generate US$31.4 billion (MOP250.8 billion) in 2015, while in the previous reports it was assumed that the industry would generate US$32.5 billion (MOP259.4 billion). The latest report produced by analysts Carlo Santarelli and Danny Valoy assumes that the decline will primarily be driven by the battered VIP segment, which will decline 33.6 per cent to US$17.6 billion. In addition, the downtrend will be followed by a mass market revenue decrease of 20.8 per cent to US$13.8 billion. With regard to May, Deutsche Bank analysts are forecasting a decrease of 37.1 per cent year-on-year to US$2.5 billion from around US$4.1 billion. This assumes that during this period the VIP segment will go down 41.4 per cent, while the mass market will drop 30.5 per cent. Openings with limited impact While at the beginning of the year analysts believed that during the second half of 2015 the opening of the new resorts in Cotai – slated for 27th May with the Grand Opening of Galaxy Macau Phase II and Broadway Macau – would kickstart recovery in the industry they are now more cautious. “The opening of Galaxy Macau Phase II is the short-term catalyst in sight given the usual practice of additional credit extending to new VIP rooms in initial operations. Yet, this is unlikely to be significant for the industry as a whole, in our view”, the latest report on the Macau gaming industry by Credit Suisse concerning April explains. The report of the Swiss Bank written by Kenneth Fong and Isis Wong also points out that in April the mass market declined 25 per cent year-on-year, while in March it dipped 21 per cent. On a different trend, while in March the VIP segment plummeted 50 per cent year-on-year, in April it went down 48 per cent. The investment bank’s analysts largely explain this by a favourable win rate of 3.51 per cent in April, higher than the average of 3.2 per cent for the same month. Challenges ahead In relation to the VIP market, Credit Suisse is questioning the impact of the increasing liquidity in Mainland China regarding the Macau gaming sector. “While we believe the improving macro liquidity in China can eventually flow through to Macau, and the improving property market help to improve the liquidity of junket collateral, the tightening control of money flow across the border and stepping up of supervision may offset the benefit from liquidity improvement”, the analysts wrote. Meanwhile, analysts stress that the mass market is being affected by the impact of protests in Hong Kong, lowering Mainland Chinese incentives to visit Hong Kong and Macau. In addition, the junkets are adopting more aggressive approaches to players in mass floor areas.
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