Divided views

Analysts at Wells Fargo predict a downturn in local gross gaming revenue of between eight and 10 per cent year-on-year, the group noted in a release. The group estimate is ‘based on current trends’ and assumes average daily revenue growth of around five per cent ‘to MOP540 million to MOP550 million’ the group notes, classifying it as ‘in line with average sequential growth trend from June to July’.
Wells Fargo takes note of Studio City’s plan to open VIP rooms this quarter, calling it a ‘shift in the property’s mass-focused strategy’ given its current lack of VIP tables, and restates its prediction that overall for the SAR ‘VIP and Premium Mass continue to decline year-on-year’.
Contrary to opinions at Wells Fargo, analysts at Telsey Advisory Group see gross gaming revenue so far this month, ‘based on gaming play for the first 10 days of July’, to be tracking upwards at 8.2 per cent, placing July gaming revenue at an estimated HK$19.6 billion. The group notes these results are ‘well ahead of the previous trends which have been running at a rate of an 11 per cent decline’.
‘Within the aggregate market trends,’ notes Tesley, ‘company management teams continue to suggest that there is some actual improvement in mass play offset by declines in VIP, but not a pronounced redirection in business levels, which the data would suggest.’ The group notes however that: ‘we are not inclined to change our view on the market overall as of yet.’
A positive outlook is attributed to Wynn, due to its upcoming Wynn Palace opening. The group ranks both Wynn and MGM as ‘Outperform’, while Las Vegas Sands (LVS) is classified as ‘Market Perform’.
The analysts at Wells Fargo classify MGM as ‘Outperform’ given that the group sees ‘positive risk-reward based on a strong Las Vegas outlook, while Wynn, LVS and Melco all come under ‘Market Perform’. Opinion is divided on Wynn, as ‘the opening of Wynn Palace this summer could be a catalyst’, however the group sees ‘equal/risk reward given near-term uncertainty’ in the local market. Both LVS and Melco were noted as likely to ‘benefit from our positive long-term view of the Macau gaming market’ however the analysts still see ‘equal/risk reward’ based on the near-term uncertainty in the market.