Jefferies‘ latest investment memo indicates that macroeconomic conditions in Macau are exerting pressure on the region’s gaming operators.
The situation in Macau appears largely unchanged over the past week, which is a stable development following a disappointing start to the month. However, ongoing regulatory scrutiny on currency exchanges and broader macroeconomic concerns in China continue to cast a shadow, the memo notes
Industry sources report that Macau’s gross gaming revenue (GGR) for the week ending July 21st averaged MOP635 million ($79 million) per day. For the month-to-date, Mass GGR increased by 1-2 percent, while VIP GGR remained flat month-on-month, with the VIP win rate ranging between 3.3-3.6 percent.
These figures represent an improvement from the lower-than-expected performance in the first week of July, when daily revenue was recorded at MOP550 million ($68.4 million). However, Jefferies cautions that ongoing crackdowns on illegal currency exchanges in Macau, including police patrols on casino floors, could potentially deter summer holiday visitation.
The sustained focus on combating illegal money activities in Macau follows a recent press conference by China’s Ministry of Public Security on July 5th, which emphasized stringent measures in the region.
According to the provided data, Macau’s Judiciary Police apprehended 1,924 illegal money changers between January and May of this year, who will face bans from entering Macau. Of these, 927 individuals were reported to the city’s gaming regulator, the Gaming Inspection and Coordination Bureau (DICJ), for inclusion on the casino entry ban list.
Despite these challenges, Jefferies forecasts gaming revenue for the remainder of the month to range between MOP560-660 million per day ($69.7-82.2 million), with an average daily revenue of MOP594-626 million ($73.9-77.8 million), totaling MOP18.4-19.4 billion for the month ($2.3-2.4 billion).
The lower end of this projection surpasses June’s daily average of MOP590 million ($73.4 million), suggesting that results are likely to align with historical trends, as July typically outperforms June.
Ahead of the 2Q24 earnings reports, Jefferies analysts emphasize the pivotal question of whether Macau’s GGR can approach pre-COVID levels, representing a 42 percent increase over 2023 but a 24 percent decrease compared to 2019. Analysts are also keen to assess the impact of ongoing renovations on market dynamics.
