CALL TO ACTION
With in-line weekly numbers reported this morning and following our trip to Macau last week, we are probably a little less negative. Indeed, some takeaways were positive on the margin but there still appears to be too much risk, particularly with Street estimates still too high.
We still think Street estimates for the Macau operators remain too high, despite recent reductions, particularly in the base or grind mass segment. However, our Macau trip last week revealed some less negative trends. Direct VIP seems to have stabilized (and maybe growing again?) and while junket VIP and premium mass probably haven’t, direct VIP carries higher margins. Additionally, there was more optimism among market participants that the highest margin segment, grind mass, may be basing sequentially.
Unfortunately, the Street seems to be still projecting YoY growth in grind mass for the operators in 2015 which appears unlikely given the volumes in the early part of the year. By contrast, simply projecting current volumes forward through the rest of the year yields a high teens YoY decline in total mass and a high single digit decline in grind mass.
Please see our detailed note: