The return of double-digit growth

The local gaming industry posted an 18.1 per cent increase in revenue for the month of March, marking the eight consecutive month of year-on-year growth and beating expectations, as wealthy gamblers took chances in the territory.

According to the official data released by the Gaming Inspection and Coordination Bureau (DICJ), March’s gaming revenue amounted to MOP21.2 billion (US$2.65 billion), as compared to MOP17.98 billion for the same month last year. On a month-on-month comparison, March’s revenue, however, represents a decrease of 7.7 per cent, down from MOP22.99 billion in February. Total revenue for the first quarter of the year reached MOP63.5 billion, a jump of 13 per cent from MOP56.2 billion one year ago.

Analysts were expecting growth of between 12 per cent and 16 per cent for the month of March. In a note, analysts J.P. Morgan Securities (Asia Pacific) Ltd estimated that year-on-year VIP growth reached “the high-20s” for the month, while the mass market also registered an increase of some 10 per cent.

The DICJ will only release the first quarter’s breakdown of VIP and mass revenue at a later point. For the period, the J.P. Morgan analysts believe VIP soared by 17 per cent year-on-year, while mass jumped by 10 per cent year-on-year.

‘As we’ve been writing for some time, junkets are seemingly enjoying an end-demand recovery from the favourable China macro backdrop of 2016 (e.g., property market rally, eased liquidity, commodity price hikes), fuelled by improved liquidity and ‘confidence’ at junkets,’ they added. A similar perspective was offered by analysts at Wells Fargo Securities, LLC, who wrote in a March 31 note that the recovery of the city’s gaming industry, especially the VIP segment, ‘could stall once the stimulus from loose credit and the Chinese housing bubble wears off’.

‘A key component of our neutral thesis is recent growth has been driven by Chinese liquidity growth and a housing bubble. We are continuing to see VIP drive growth in the market… In our view, the VIP strength has been partly led by a Chinese real estate bubble,’ the analysts, led by Cameron McKnight wrote.

‘There has historically been a strong correlation (85 per cent) between the housing market and VIP volume growth. We expect the increased government restrictions on real estate to at some point cool the market,’ they further explained.

Recently, Beijing authorities announced an expansion of the capital’s property curbs, from the housing market to commercial real estate, which restrict individual purchases of commercial properties and suspend personal loans for commercial real estate.

Macau’s gaming revenues have surged since the second half of 2016 with the opening of new resorts helping to draw in high-rollers and more casual gamblers.

hinese President Xi Jinping’s campaign against shows of wealth by public officials in 2014, had dried up the stream of VIP spenders from the mainland.

Analysts remain cautious about the sustainability of revenues from the VIP market, but have called a bottom to a slump that has afflicted Macau for more than two years. Overseas visitors are an increasingly common sight in Macau, which is trying to diversify an economic model that has depended on mainland high-rollers for more than a decade.