THOUGHTS ON SOFT JAN IN MACAU

Only 7% growth for January is disappointing but anecdotal evidence suggests strong Mass start to February.

 

 

More likely than not, low VIP hold played a role in the soft January that saw GGR grow only 7.3%.  Street consensus was for +13% and we were much higher earlier in the month.  So what are the explanations?

  • Low hold – we had heard even before the last week of January that some operators had experienced some bad luck
  • The placeholder strikes again – as we wrote about on 1/27/14 “MACAU WEEKLY PLACEHOLDER REEMERGES?”, the reported HK$775 million average daily table revenues for the 3rd week of January may have been a placeholder for incomplete data.  We’ve seen that number used many times with the following week as the catch up week.  For January, if the HK$775 was the correct number, that would imply the last 5 days of January generated an insanely low ADTR of HK$545. 
  • Macau volumes just fell off the cliff ahead of the Chinese New Year celebration

We think that a combination of low hold and slow volumes for the last 2 weeks of January contributed to the disappointing YoY growth.  While it’s possible that the last week was that bad, it is more likely the HK$775m reported as daily table revs in the 3rd week was indeed a placeholder.

 

So where does that leave Macau going forward?  If February bounces back to up 20% - our projection – not many will care that the pre-Chinese NY was softer than usual and VIP held low.  Why do we think February could be up 20%?

  • Our model predicts it – we quantitatively look at volume trends sequentially and seasonally and calendar adjust to project monthly revenues.  February faces a relatively easy comp at 12% last year.  Rolling Chip volume actually declined slightly last year.
  • Contacts suggest Mass is off the charts here in February.  Table minimums are higher and some casinos may have opened more than tables temporarily - surely the Cotai properties because they have the space. 
  • Junket biz is expected to accelerate later this week.

The disappointing January growth reported today will no doubt pressure the stocks.  Not sure they need to be bought today as the sentiment could linger until the next data point.  Upcoming data points should be the release of the January detail (later this week) which could reveal a low hold percentage and the first February weekly table revenues (Monday). 


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