Supplier News
China – Analyst upgrades Macau operators as mass shows conversation
By Phil - 19 September 2016
Having been downbeat about Macau’s casino sector, Deutsche Bank‘s Karen Tang has now predcited an upswing in the market, upgrading Sands China, MGM China and Melco Crown to buy.
She said: “Over the past two weeks, we’ve had extensive interviews with a dozen of casino service staff & premium mass hosts. We learnt that gaming spend per visitor has started to rise, and VIPs are returning as premium mass players. We conclude that Macau is now at the start of a mass-led GGR recovery. Importantly, both base mass and premium mass are growing again. We forecast that Mass GGR growth will accelerate from four per cent year-on-year in the second quarter of 2016 to 10 per cent year-on-year in the second half of 2016 and to 12 per cent year-on-year in 2017. As mass has higher margins, we lift our sector EBITDA by 10 per cent to US$6.6bn for 2017. We prefer mass-focused operators, and upgrade Sands, MGM China & MPEL from Hold to Buy.
She added: “Over the past two years, over 100 small junket operators closed their VIP rooms. This left hundreds of agents and service staff jobless. Some were recruited by casinos as premium mass marketing costs. As cash access via UnionPay remains easy, these new hosts are helping VIPs convert into premium mass. Our proprietary table count confirms the return of premium mass. Proportion of baccarat tables with over HK$2,000 min bet rose from 29 per cent of the mass floor in Dec to 36 per cent by July, with minimum bets rising prominently since July. We believe this player conversion can sustain premium mass growth for the next one to two years years. Each mass market player is spending more. In the second quarter, Macau’s mass gross gaming revenue rose four per cent even though the total number of visitors fell 0.5 per cent.”
