UBS takes less cautious view on Macau

UBS analysts said they are moving away from a cautious view of Macau’s gaming industry and taking a more constructive stance following the recent visa change policy.

In a note, Anthony Wong and Angus Chan say they believe market expectations have been low in the sector, with concerns on further policy tightening and large consensus downgrades. 

However, the recent visa policy change dampens fears on further local tightening.

“It also reduces the risks of large consensus downgrades, even though fundamentally the policy change is not enough to cause any upward GGR revisions in the near term. We believe it is unattractive to take a negative sector position in this backdrop.”

They added that the consensus downgrades could be more muted than feared, given a weak 15Q2 GGR rate of negative 12 percent QoQ.

Macau’s gambling revenue fell to a five-year low in June of 36.2 percent, taking the fall in revenues to 13 straight months since China’s crackdown on corruption took off.

“We believe this could now be more muted than feared. Partially caused by visa tightening, sector GGR dropped from MOP1.14bn daily at the peak to MOP620m in Q215, a drop of 46%.”

The analysts’ 2015 forecast of negative 27 percent YoY implies MOP730 million in the second half of the year,  “which is aggressive, but risks of large downgrades now appear reduced.”

“Further, the govt had now signalled an intention to support the industry, further underpinning our medium term forecasts. We assume GGR growth of +7% YoY in 2016.”

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