2H to help Macau 2020 GGR to grow circa 4pct: DB

“We are projecting Macau GGR growth to be back-half-weighted in 2020, with aggregate GGR growing 3.6 percent year-on-year,” wrote analysts Carlo Santarelli and Steven Pizzella. “We project mass GGR growth of 16 percent, and we are projecting an 11 percent decline in VIP GGR,” they added.

Factors influencing the likely second-half performance of the market included seeing “VIP comparisons stabilise” in the second half of next year. The analysts were referring to a lower base for assessing year-on-year comparison due to the GGR contraction in the second half this year.
“With limited new supply in 2020, we expect shifts in operator EBITDA [earnings before interest, taxation depreciation and amortisation] market shares to be more related to the performance of – and relative exposure to – the mass and VIP gaming channels,” the analysts added.

They were alluding to the fact no major new gaming venue product was expected by investors regarding the Macau market in 2020.

Deutsche Bank said United States-based casino operators Las Vegas Sands Corp – via its Sands China Ltd unit – and Wynn Resorts Ltd – via its Wynn Macau Ltd unit – were “well positioned for Macau share gains, specifically within the mass channel” of gaming operations.

For Las Vegas Sands, a trigger might be “capacity additions” to its Macau hotel inventory and for Wynn Resorts, “refurbishments at Wynn Macau,” the brand’s first Macau property on the city’s peninsula, and a rejig of rooms and gaming areas there.

“In 2020, we expect Las Vegas Sands to debut its two hotel tower expansions,” said Messrs Santarelli and Pizzella, referring to a “290-room Four Seasons Tower Suites expansion” in Macau’s Cotai district and the “370-room Londoner Tower suites debut”. They were alluding to ongoing remodelling work at Sands Cotai Central to create a themed resort called the “Londoner Macao”.

SJM, Galaxy Cotai projects
“Given the redevelopment activity at Sands Cotai Central throughout the majority of 2020, we anticipate net new room growth is likely to remain relatively subdued, over the course of 2020,” said the Deutsche Bank team.
Referring first to a new Cotai scheme from SJM Holdings Ltd, which has been slated by that company to be ready by the end of 2020, and second to a new phase at Galaxy Entertainment Group Ltd’s Galaxy Macau flagship property on Cotai, the institution stated: “We believe it is likely the SJM Grand Lisboa Palace project comes online in early 2021, akin to Galaxy Phase 3, as opposed the second-half 2020 target.”

In August Galaxy Entertainment’s management said the first portion of Galaxy Macau Phase 3 would probably open in late-2020, rather than mid-2020 as had been mentioned previously.

Deutsche Bank said in its latest report it was projecting Macau market hotel room supply growth of “1.8 percent in 2020, with 2021 and 2022 poised to grow 8.9 percent and 7.2 percent, respectively, assuming Galaxy [Macau] Phase 4 remains on track for 2022”.

Macau hotels were providing an aggregate of 38,400 guest rooms for the local market as of October 31, a tally that was actually down 0.7 percent year-on-year, according to the most recent data from the city’s Statistics and Census Service.

Although Deutsche Bank said fresh gaming table supply – managed under Macau’s table cap policy – was not a significant factor in gaming operations’ performance in the current trading conditions, it nonetheless expected Grand Lisboa Palace to be granted  “approximately 100 incremental tables”. As a result, the institution said it was “forecasting 1.5 percent table supply growth in the market in 2021”.

“Our table growth forecasts do not include incremental table authorisations for some of the recently-opened properties, which could potentially add another 1 percent to the [table supply] growth rate. Assuming 1,000 slots at Grand Lisboa Palace, our slot-supply market forecast is up approximately 6 percent in 2021,” said the Deutsche Bank team.