March gross gaming revenue to date has been disappointing, and the weakening GGR run-rate may extend through April, says analysts.
However, Bernstein says it maintains its forecast that Q1 will show quarter on quarter improvement, and Q2 may potentially be flat, with an improvement in GGR to start in towards the end of Q2 and into Q3.
Bernstein says the headwinds facing the sector continue to be VIP and high-end of Premium Mass related. “However we see numerous catalysts materializing over the next 1-2 years to fuel the growth in Mass market, which we believe is the structural driver of Macau market. The key catalysts driving Mass market will be infrastructure development, new casinos’ ramp up, and the resilience of the Chinese consumer.”
Bernstein says it remains more inclined towards Sands China due to its mass dominance. “[Sands China] remains a long-term winner from Macau’s Paradigm Shift from VIP to Mass… Its recent outperformance with respect to improving margin and expanding market share shows the company’s mass strategy and critical mass centered in Cotai is paying off,” said Bernstein. “While coming later this year (September 2016), the 3,000 room Parisian adds to Sands’ critical mass on Cotai with a wholly mass oriented property, which we think will do well with Chinese customers.” Bernstein rates Sands China Outperform with TP HK$33.00 for its product positioning towards mass.
Tim Craighead, senior industry analyst at Bloomberg Intelligence took a similar position in a recent report released on Mar. 14, which also points to the importance of the mass market in Macau.
“Sands China Ltd. stands out among Macau casino operators for its focus on mass-market clientele and significant non-gambling business. These factors have underpinned revenue and higher profitability versus many peers during the 2014-2015 downturn,” said Craighead. “The lion’s share of Sands China’s profit comes from its mass-market casino tables and non-gaming businesses, and the mix continues to shift more in this direction. These segments generated about 80% of last year’s operating profit.”
However, Craighead also adds due to the delay in Sands Parisian, Galaxy and Melco Crown will likely get an advantage in early 2016.
“Sands China’s postponement of its Parisian resort on Macau’s Cotai Strip to late 2016 extends a window for Galaxy and Melco Crown. They should gain share of overnight visitors in the near term following their openings last year,” said the Bloomberg analyst.