Macau gaming sector recovery to bolster Singapore counterpart: Maybank KE

VIP gross gaming revenue in Macau surged 21% YoY in the first two months of 2018.

Maybank Kim Eng reported that in the first two months of 2018, VIP gross gaming revenue (GGR) in Macau surged 21% YoY, and based on their conversations with industry participants, this recovery should also spill over to Singapore.

Maybank Kim Eng analyst Yin Shao Yang said, “Our conversations with industry participants reveal that the return of Chinese VIPs to Macau thanks to improving macroeconomic fundamentals in China, has and will spill over to other Asian casinos (Singaporean ones included). In the words of an industry participant that we spoke to, ‘Macau is the source market of Chinese VIPs. All Chinese VIPs that gamble in Australia, Singapore, and the Philippines today all started out in Macau. When the Macau VIP market recovers, we benefit as well’.”

Yin noted that detractors could are pointing out the weakness in the industry VIP volume of Marina Bay Sands (MBS) and Resorts World Sentosa (RWS), which dripped 2% YoY in Q4 after growing 14% YoY in Q2 and 29% YoY in Q3. “By extension, they conclude that the scope for potential earnings upgrades for Genting may be narrowing,” he added.

However, in the long term, Yi observed that Q4 RWS VIP volume grew around 10% YoY to $7.5b. The decline in industry VIP volume was due to Marina Bay Sands (-8% YoY). “Therefore, we are not overly concerned and posit two possible reasons for 4Q2017 industry VIP volume easing 2% YoY,” he added.

Maybank KE also noted that VIP volume and win rate are inversely correlated. “VIP volume is the product of buy-in and number of times the buy-in is rolled. If VIP win rate is high (casino wins more and VIPs lose more), the number of times VIPs roll their buy-ins will fall resulting in lower VIP volume,” it added.

Yi observed that this is what happened to MBS in as its VIP win rate then of 3.95% was the second highest in its history. “As MBS VIP win rate normalises to lower levels, we expect MBS and industry VIP volume growth to revert to higher levels going forward,” he said.

The analyst concluded that RWS can generate a lot more VIP volume by loosening its credit extension policy further. Meanwhile, Genting aims to grow RWS VIP volume per day from $80m currently to $100m over the next two to three years.