June GGR sees little benefit from Galaxy opening, analysts say

Gross gambling revenue in Macau will show another significant drop in June, despite the easier year-on-year comparison, with the opening of Galaxy Entertainment’s Galaxy Phase 2 and Broadway Macau failing to generate as much traffic as expected, analysts say.

UBS expects June GGR to drop 32 percent to 37 percent year-on-year, analysts Anthony Wong and Angus Chan wrote in a note, adding that they believe the daily run rate could pick up slightly with the upcoming Dragon Boat festival.

“For the full month, we expect GGR at MOP17.1-18.4bn, or down 32-37 percent YoY- continuing a trend of slight improvement in YoY declines driven by increasingly easy base,” they said.

Wong and Chan wrote that the junket segment is “clearly still sequentially weakening, and mass segment is not showing enough signs of stabilization yet.”

“No pickup in demand by Jul-Aug would be disappointing Although it is still very early days, revenues trends at sub MOP600m since Galaxy’s opening in late May are below market expectations.”

Sterne Agee analyst David Bain wrote GGR from June 1 to June 14, was MOP7.4 billion, which would indicate a 39 percent drop for the entire month. Bain says he is sticking to a monthly forecast for a drop of between 33 percent to 38 percent.

Bain agreed the figures for the first week of June were disappointing given the proximity to the Galaxy opening, yet said there has been an improvement on a weekly basis since.

The UBS analysts said while it is normal seasonality for June to show slow activities compared to May, it also means new supply has brought no discernible impact to industry revenue yet.

“We would look to the holiday months of Jul-Aug to better gauge how customers have responded to Galaxy’s opening- from both industry demand and market share shift standpoints. We think no meaningful pick up in revenue by then could trigger another round of expectations revisions.”

Following a recent trip to Macau, the analysts said companies continue to feel highly uncertain as to when revenue will improve.

“On policy front, operators do not feel the government is worried about the current level of gaming revenue, and some see decisions on smoking lounges to be made in Q3. In separate meetings with 30+ investors over the past week, we were surprised negative sentiment is a bit less vs. a few months ago.”

Bain says he also expects further downward revisions from analysts to Q2, 2015 results, with the consensus for property EBITDA too high at between a drop of minus 4 percent to minus 12 percent.