Macau VIP revenue unlikely to pick up until Q3, 2015, analysts say

Macau is unlikely to see any significant improvement in VIP volumes until at least the third quarter of next year, analysts say.
Gross gambling revenue numbers over the next few months will suffer in particular from a comparison with strong year-ago figures and VIP revenue is likely to continue to show double digit declines, Standard Chartered analyst Philip Tulk said in a panel session at the Macau Gaming Show. “February will be a really, really hard comp,” he said.
Tulk said aside from the headwinds from the crackdown on corruption in Mainland China and the general slowdown in the economy, there was also concern about a lack of confidence in the junket system.
Many of the junkets rely on some of the high net worth individuals as a source of funds and several high-profile cases of money disappearing from junket operators earlier this year has shaken faith in the business model, he said.
“Until we see that confidence returning, we will not see a snap back.”
Union Gaming Research analyst Grant Govertsen concurred that the recovery in the VIP sector could still be some time away, though the mass market sector may begin to recover more quickly, especially if the pro-democracy protests in Hong Kong are resolved.
“The wild card may be Galaxy Phase 2 which opens in May in the middle of Q2 and we may see some more liquidity, we may see a pop.”
GGR in Macau has fallen in each of the past five months, with the 23.2 percent drop in October the worst on record. Sterne Agee says the headwinds facing Macau’s gaming market have not changed and it expects a fall in November gross gaming revenue of 17-21 percent. While, Morgan Stanley Research is forecasting Q4 gross gambling revenue in Macau to fall 15-20 percent year-on-year.
The analysts said it was also too early to call a bottom in casino stocks, however when the turnaround does come it’s likely to be fast.
“There is a ton of money out there, but they are waiting for the last shoe to drop before ploughing in,” Govertsen said. “A lot of investors missed the boat last time around and they don’t want to miss it again.”
He said when the market turns stocks could move up “violently,” even on very little news flow.