Official gross gaming revenue figures released by Macau’s Gaming Inspection and Coordination Bureau (DICJ) have revealed that mass market revenue grew by 17.1% year-on-year in the fourth quarter of 2017 to MOP$31.7 billion (US$3.9 billion), a result that Union Gaming analyst Grant Govertsen describes as “likely well outside of investor expectations.”
VIP GGR grew 21.9% for the quarter to MOP$40.6 billion (US$5 billion), below expectations of 30% growth, with non-VIP baccarat surprising with an 18.6% year-on-year increase. Other non-VIP games grew by 9.5%.
In a Tuesday note, Govertsen attributed the sudden rise in Macau’s mass market revenues to “a clear resurgence in the lower tiers of mass market as we’ve witnessed a significant uptick in low-end patrons (e.g. the Hong Kong ferry terminal has been bursting at the seams more recently).”
Govertsen also noted that the GGR breakdown could be due in part to an unwinding of recent table game reclassifications as new smoking laws start coming into effect, but added, “If there happens to be no positive adjustment to get to a real mass market growth rate due to reclassification we are still thrilled to see mass market staging a comeback, even at the expense of a deceleration in the rate of growth in VIP.
“While we are not yet ready to adjust our 2018 expectations for a potentially-better-than-expected mass market story we are biased to the upside as we think about what 2018 could ultimately look like relative to our initial expectations of ~10% mass market growth this year.
“This strength in mass in particular suggests there is still upside as we think about valuations of the Macau names given the resulting positive flow-through from strength in mass GGR.”
Total GGR for 4Q17 grew by 19.8% to MOP$72.6 billion, despite a slight decline of 30 tables in the number of gaming tables in operation – down from 6,449 in the third quarter to 6,419.
“Clearly there remains some fluff in the market given that not all tables allocated are being operated,” Govertsen said. “This is good news as we think about the need for potential table allocations between now and the end of the table cap (~2022). At this point it feels like the table cap should not be a material issue for most (but not all) operators over the near and medium terms.”
