April’s Gross Gaming Revenues fell another 9.5 per cent in Macau, marking the 23rd consecutive month of decline as figures hit 17.341bn patacas (US$2.167bn).
Despite the loss, the buzzword for operators and analysts alike was ‘stabilisation.’ April was seen as being a typically weak month for Macau’s casinos with performance better than expected by many analysts.
Tim Craighead, a Bloomberg Intelligence analyst said: “The casinos produced another reasonable monthly revenue performance in what is a seasonally slower shoulder month. It still looks to us that the business is stabilizing and the next big catalysts to watch for are the summer travel season and the new resorts from Wynn Macau and Sands China.”
Union Gaming‘s Grant Govertsen said: “While it is true that the early parts of April were slow, volume began picking up towards month-end with the weekend of the 22nd experiencing solid volumes across all gaming segments. This uptick in volume has seemingly carried through to the current weekend, as we witnessed very busy casino floors across Macau on Saturday and again on Sunday. In our view, it is clear the holiday is bringing a real uptick in gaming volumes across the board and we would expect this to carry into the first week.
Carlo Santarelli and Danny Valoy of Deutsche Bank Securities said: “We believe the headline decline of 9.5 per cent in April is likely to be interpreted as better than recent expectations, though likely reinforces investor views around weekly checks becoming less reliable.”
Two of the operators also reported their first quarter earnings
Galaxy Entertainment actually reported a quarterly profit increase for the first time since 2014 in its latest set of results for the first quarter of 2016.
Dr. Lui Che Woo, Chairman of Galaxy Entertainment said: “We experienced a solid start to 2016 with first quarter Adjusted EBITDA of $2.4bn, as we adjust to changes in the Macau market. We continue to see signs that the market is potentially stabilising in the near term and remain confident in the long term prospects of Macau. We remain focused on executing operationally as we continue to drive our mass business while diligently managing our cost structure.”
Galaxy Entertainment reported a quarterly profit increase for the first time since 2014 in its latest set of results for the first quarter of 2016.
Revenue for the quarter came in at $13.4bn, up one per cent sequentially and down two per cent year-on-year but prompting claims of stabilisation in the market.
Galaxy Macau generated revenue of $9.8bn increasing two per cent sequentially and six per cent year-on-year.
StarWorld Macau continued its successful transition to mass gaming with revenue of $2.9bn down two per cent sequentially and 26 per cent year-on-year.
Dr. Lui Che Woo, Chairman of GEG said: “We experienced a solid start to 2016 with first quarter Adjusted EBITDA of $2.4bn, as we adjust to changes in the Macau market. We continue to see signs that the market is potentially stabilising in the near term and remain confident in the long term prospects of Macau. We remain focused on executing operationally as we continue to drive our mass business while diligently managing our cost structure. Since launching our $800mcost control program in early 2015, we have realized savings of approximately $650m up to 31 March 2016 with the balance to be delivered over the remainder of this year.”
Over the last eight quarters the Macau market has experienced a number of strong headwinds that have impacted revenues. After this extended period Galaxy said it was encouraged by the fact that first quarter 2016 gaming revenue grew two per cent sequentially to $55bn. Visitor arrivals, whilst slightly down over the past 12 months, have remained robust at approximately 30m visitations per year, where recent policy changes hopefully serve as a catalyst for future growth.
In terms of future development, Galaxy is yet to start work on Cotai Phases 3 & 4 of Galaxy Macau with site investigation works expected to commence in 2016. In Hengqin, it has plans to develop a world class destination resort on a 2.7 sq.km land parcel whilst internationally it said it was ‘continuously exploring opportunities in overseas markets.
Dr. Lui added: “Our exciting development plans for Galaxy Macau Phase 3 are progressing and will include a range of unique and differentiated offerings that will support the Macau Government’s objective to develop Macau into a World Center of Tourism and Leisure. These include significant MICEE facilities, a range of hotel options, a unique retail and lifestyle precinct and a truly differentiated family themed entertainment offer. We look forward to unveiling our plans in the near future.
“Our balance sheet remains exceptionally strong and liquid with net cash of $8bn and we remain virtually debt free. We continue to believe that Macau has a very bright future. Unchanged long term fundamental growth drivers such as rising domestic consumption in China and a rapidly expanding middle class that aspires to travel more frequently supported by major infrastructure improvements, underpin our belief that Macau will register strong visitor growth in the years ahead. Finally, I would like to take this opportunity to thank all of our committed and hard-working staff, who deliver exceptional customer moments and are committed to our renowned ‘World Class, Asian Heart’ service philosophy.”
SJM Holdings meanwhile saw its revenues decrease by 22.8 per cent in its first quarter for the three months ended 31 March 2016, reaching HK$11,019m.
Adjusted EBITDA decreased by 32.5 per cent over Q1 2015 to HK$838m. Profit was down by 44.1 per cent over Q1 2015 to HK$561m. SJM’s share of the Macau casino sector continued to fall with its gaming revenue accounting for 20.2 per cent of Macau’s casino gaming revenue during Q1 2016, as compared with 22.7 per cent in Q1 2015.
The Grand Lisboa Palace, the group’s integrated resort on Cotai which is planned for completion around the end of 2017, continued to make progress on construction in Q1 2016.
Mass market gaming revenue was HK$5,146m, a decrease of 14.9 per cent from HK$6,048m, whilst slot machine and Tombola revenue was HK$267m, a decrease of 14.3 per cent from HK$311m.
During the first quarter, the group operated an average of 369 VIP gaming tables, down from 530 in the first quarter of 2015, 1,298 mass market gaming tables, up from 1,209 and 2,898 slot machines, up from 2,793.
Dr. Ambrose So, Chief Executive Officer of SJM Holdings Limited, said: “Though the challenging environment in the gaming market persisted into 2016, there are signs of stabilisation, particularly in the mass market segment. We are pleased to note in the recent quarter an increase in SJM’s Adjusted EBITDA margin from the fourth quarter of 2015, and we continue to forge ahead with confidence in building our Grand Lisboa Palace in Cotai for completion in 2017.”