- Observed premium and grind mass posted minimum bet levels were lowered on average again in March. Our new dataset, observed average bet levels, also continued its trend lower in March.
- We believe both metrics are indicative of demand. Minimum bet levels are a measure of pricing set by the casino. Observed average bet amounts are not as reliable but in the aggregate should directionally track true average bet. Average mass bet size multiplied by the number of bettors should equal mass volumes.
- The premium mass trend shouldn’t be a surprise. However, we’re most concerned with the trends in minimum bets and average betting levels for grind mass given the higher margins associated with this segment and the perception among analysts that it is still growing. The data suggests otherwise.
- Street estimates need to come down to reflect lower grind mass revenue assumptions for 2015/2016 and the associated negative margin impact.
- While Hedgeye remains below the Street in our 2015 EBITDA projection for all Macau operators, the largest disparity (10%) remains with LVS - the most exposed operator to the grind mass segment.
Takeaway: Latest data on bet levels in March corroborate our assertion that Street is underestimating the degradation in Macau’s grind mass segment.