Goldman Sachs sees Macau weakness continuing

    Goldman Sachs says it expects the recent slowdown in Macau’s gross gambling revenue to continue at least in June and July and said there are downside risks to full-year forecasts.
    The firm’s comments follow the release of data showing that May GGR grew at just 9.3 percent, the slowest level in four months. The news sent U.S. and Hong Kong-listed casino stocks down sharply on Tuesday.
    “While a VIP/mass-market GGR breakdown is not available yet, we believe the weakness was driven by a low luck factor for select operators and slower rolling volume momentum across the industry since April,” it said in a note.
    Goldman recently cut its estimates for 2014 VIP growth to 5 percent year on year, due to weakness in China’s property market and on expectations a probe of corrupt Chinese government officials may affect junket credit.
    Going ahead, GGR comparisons are going to be affected by strong year-ago comparisons, for example the market was up about 17 percent in June and July last year. While the World Cup may also prove a distraction, it said.
    Goldman expects overall 2014 GGR growth of 12 percent, split between 5 percent growth for VIP, and 29 percent for the mass market, which it said remains healthy.
    As a result its top stock picks are those with the biggest exposure to the mass market, such as Sands China, which only gets 13 percent of EBITDA from VIPs.