Market is overestimating the potential of new openings: Daiwa

Brokerage Daiwa Securities Group says the market is overestimating potential GGR growth brought by new property openings this year.

“As we see it, the street expects the back-to-back openings of Wynn Palace and the Parisian to expand Macau’s gaming market meaningfully, with market share seen shifting in favour of these operators. But this expectation seems unrealistic to us, given the operators’ historical track records,” said the brokerage in a note on Wednesday, adding that the market has also underestimated the ability for operators without new openings to defend their market shares.

Wynn Palace is set to open next week on August 22. The $4.2 billion casino resort will be Macau’s most expensive integrated resort to date.

Sands China’s Parisian Macau is set to open on September 13, featuring a scale replica of the Eiffel tower, and will be the operators’ fifth entry in Macau.

According to Daiwa, while the street believes the new openings will expand the respective operators businesses, increase the operator’s market shares, and drive growth in the market; the underlying historical trends tell another story.

Daiwa says there is no conclusive evidence over Wynn Macau’s 10-year record in Macau that proves the properties has taken market share or driven incremental demand for the industry.

“Wynn has been steadily losing market share since Wynn Macau opened in 2006,” said the brokerage.

Sands on the other hand have had a mixed track record in regards to new openings, but it is worth to note that Sands actually lost market share after Four Seasons opened, said Daiwa.

“After Four Seasons/Plaza’s opening in August 2008, Sands actually ceded more than one-third of its mass market share to its competitors — a 10pp change that is equivalent to more than the entire market share of Wynn or MGM today.”