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Macau’s “unique” reporting methodology could portend a volatile end to April.


The setup for a sharp positive reversal in Macau stocks may be before us.  It’s possible that last week’s sluggish Macau table revenues were underreported and with the corresponding catch up over the last 3 days, April could push into double digit growth for the month.  A strong May could continue the momentum.  


We’ve written about “the placeholder” in previous notes.  The Macau government fails to secure the comprehensive data for its weekly release and issues a placeholder average daily table revenue (ADTR) figure of HK$775 and investors panic over the low level of revenue.  It wasn’t long ago that HK$775 million per day was considered a strong number but we’re way past that. 

With ADTR of HK$903 million – still below expectations – this past week, the placeholder issue wasn’t as obvious.  However, this past week contained only 6 days since the prior week’s data was not released until Tuesday rather than the typical Monday.  Hedgeye’s crackpot team of statisticians quickly calculated the reported gaming revenues over 6 days of $5.425 billion actually averages to the magical HK$775 million when divided by 7 days.  Apparently, the placeholder is a weekly number not a daily number.

Moreover, upon further review, there appears to be more than one placeholder.  In fact, there appear to be 4 over the past 3 years:  HK$4,655m (8 times over 205 reporting observations), HK$5,425m (17x and the most common), HK$6,200m (8x), and HK$6,975m (6x). On a 2014 YTD basis, there appear to be 6 placeholders in the 18 periods, while during Q4 2013 we believe 8 of the 12 periods were placeholders. 



After eyeballing the data, it appears that sometimes the “catch up” occurs either in the week following the placeholder week or in the last week of the month.  We’re not positive April will end with a bang – sometimes the catch up is negative – but it should be volatile.  For example, following a HK$5,425 million placeholder for the week ended 1/26/14, the last five days produced ADTR of only HK$555 million, 36% below the average for the month.  On the other hand, March contained two placeholder weeks, and the last week of the month posted an ADTR 32% higher than the January average.

Either way, we remain constructive on May in Macau and with the already stocks reflecting a VIP slowdown, that could be the catalyst these stocks need.