Macau August Gaming Revenue Dinged by Suncity Controversy, Devalued Yuan

Posted on: August 26, 2019, 11:15h. 

Last updated on: August 26, 2019, 12:35h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Through the first 25 days of August, gross gaming revenue (GGR) in Macau slumped four percent on a year-over-year basis. But with just six days left in the month, turnover in the world’s richest casino center will likely top June and July figures, according to a report issued by Bernstein on Monday.

The Wynn Macau. Analysts expect lower August revenue in the Chinese gaming hub. (Image: Business Pundit)

For the Aug. 1 through Aug. 25 period, Bernstein estimates Macau GGR to be $2.54 billion, the equivalent of a daily rate of almost $102 million. While Macau’s August 2019 GGR total will likely be below last year’s tally, Bernstein noted that VIP volume is on pace for a mid-to-high single-digit month-over-month increase, while mass market revenue is on track to show a low-to-mid single-digit jump from July.

The research firm said August gaming revenue was hindered early in the month by Typhoon Lekima, which struck some Chinese coastal cities, preventing would-be gamblers from jaunting off to Macau. In Bernstein’s estimation, the bigger issue for Macau companies this month is the ongoing controversy surrounding junket operator Suncity.

Further, the negativity surrounding Suncity continues to pressure junket VIPs, as some agents withdraw some funds and some VIP players delay visiting Macau,” said Bernstein analysts in a note obtained by Casino.org. “Overall negativity surrounding the geopolitical and macro situation continues to have impact on GGR.”

Earlier this month, Suncity CEO Alvin Chau was banned from going to Australia after media reports swirled down under that he may have ties to Chinese organized crime.

Not Much Protest Impact

Shares of US-based casino operators with significant positions in Macau have been pounded this month amid intensifying trade hostilities between the US and China, the world’s two largest economies, and the pro-democracy protests in Hong Kong.

For example, Las Vegas Sands Corp. (NYSE:LVS) and Wynn Resorts, Ltd. (NASDQ:WYNN), two companies that own a combined seven casinos in Macau, entered Monday with month-to-date losses of 15.23 percent and 23.61 percent, respectively. However, Bernstein joins JPMorgan in noting that the Hong Kong demonstrations, which have stretched into a third month, likely didn’t pinch Macau GGR much in August.

“The protests in Hong Kong may have also caused some transport disruption and created a headwind to China visitation into HK (and onward visitation into Macau). But we believe the impact from the HK protests has been immaterial,” said the Bernstein analysts.

For Macau operators, the bigger near-term hurdle may be the Special Administrative Region’s slowing economic growth. Recent data indicates gross domestic product (GDP) has contracted for two straight quarters, indicating a recession is afoot.

Another Problem

Another issue potentially confounding Macau gaming venues is weakness in the Chinese yuan. As part of its retaliation against the US for trade tariffs, Beijing devalued its currency earlier this month, sending the yuan below seven against the US dollar for the first time since 2008.

China denies the move was aimed at the US. Rather, policymakers there say it was designed to bolster the world’s second-largest economy. But even if that’s true, it’s an acknowledgement of slowing growth in China, which is an obvious headwind for Macau.

Bernstein noted yuan weakness poses risks to Macau GGR growth.

“Historically, there has been some correlation between GGR and the RMB/HKD and USD FX rate. The RMB broke 7 RMB/USD earlier this month and remain weak,” said the research firm.