UBS, DB downgrade Macau mass market expectations

    Macau stocks took another battering yesterday, down between 3-8 percent on concerns over slowing mass market growth. Mass table revenue grew 17 percent YoY in July, below estimates of 21-25 percent. The slowdown was not uniform, with the premium mass segment performing well (+36 percent at Wynn; +40 percent at MGM) while growth in non-premium slowed considerably (+12 percent at Venetian; +16 percent at Galaxy Macau). UBS said in a note that this may partially be explained by casual gamblers being more likely to bet on the World Cup than hard core table game players, though it was difficult to tell how much impact this had. UBS said consensus forecasts of 22-25 percent growth for the mass segment were risky, and was more comfortable with growth forecasts of 17-18 percent for 2015-17. Although spending per visitor was likely to remain in the single digits for the next couple of years, the underlying fundamentals remained strong, supported by: 1) income growth among China’s middle class; 2) the build-out of hotel rooms in Cotai, which adds capacity to serve the “middle” mass segment, who are currently priced out of Macau; 3) infrastructure improvements, including the Hong Kong-Zhuhai-Macau Bridge, which will be completed in 2016; and 4) construction on Hengqin Island. Deutsche Bank also lowered its annual growth forecast for Macau casinos to 6.5 percent from a previous outlook of 8.6 percent.