Macau casino revenue miss signals more volatility with VIP surge

[HONG KONG] When high rollers are the biggest drivers of Macau's casino revenue, it's much harder for analysts to predict betting results.

The hub's casino stocks tumbled Monday, with Wynn Macau leading losses after gaming revenue rose almost 15 per cent in December to 22.7 billion patacas (S$3.81 billion) - missing the median estimate of a 20 per cent increase in a Bloomberg survey.

Analysts attributed the unexpected slower growth to bad luck for casinos as gamblers took home greater-than-expected winnings. Many of those winning gamblers were high rollers. High stakes players will continue to dominate in 2018, and these smaller groups of elite players are expected to bring gaming revenue turbulence with them.

"This volatility can be driven by the luck factor or even by the timing of VIP trips, especially on the part of some of the biggest VIP players," said Grant Govertsen, an analyst with Macau-based Union Gaming Securities. "Since the growth in the market is being driven by VIP, it re-introduces the concept of volatility to monthly and quarterly results."

High rollers drove revenue at a faster pace than casual gamblers for most of last year. As they continued their return to Macau after a Beijing crackdown on corruption kept them away from the tables, actual monthly gaming revenue deviated from analysts' estimates. In nine separate months, actual casino receipts growth showed more than a three percentage point difference from analyst estimates.

Analysts also had a harder time forecasting during peak seasons, especially when VIPs delayed their trips. One surprise example: revenue for the popular eight-day Golden week holiday in October was lower than expected. The overall monthly receipts hit a three-year high, beating analysts estimates and was driven by a post-holiday push by high rollers.

Despite the the weaker-than-expected performance in December, analysts are still optimistic about the gaming market in 2018. "We're not too concerned about the December results given that we believe volumes remain quite strong across all segments," said Mr Govertsen.

Wynn Macau dropped as much as seven per cent, the biggest tumble in more than a year Tuesday in Hong Kong. Galaxy Entertainment Group, Sands China and SJM Holdings all lost more than five per cent. The benchmark Hang Seng Index gained as much as about 1.8 per cent.

BLOOMBERG