Macau GGR to increase 5% YoY in 4Q24 on stronger yuan: CICC

As the fourth quarter of 2024 approaches, the gaming industry in Macau is positioned for promising growth, according to a recent report from China International Capital Corporation (CICC). Analysts forecast a quarter-on-quarter increase of 4 percent and a year-on-year rise of 5 percent in total gross gaming revenue (GGR). This optimistic outlook comes amidst a backdrop of shifting economic conditions and evolving consumer behavior.

CICC’s report, which was cited by AGBrief, identifies several key factors that could fuel this anticipated growth. One significant element is the strengthening of China’s yuan (CNY) or renminbi (RMB) against the Hong Kong Dollar. This currency appreciation is expected to not only draw more visitors to Macau but also enhance their spending capabilities while they are there. In addition to currency dynamics, analysts predict that consumer confidence will improve in the fourth quarter. This boost in confidence is likely a result of various stimulus policies rolled out by the Chinese government, aimed at invigorating domestic spending.

Non-gaming activities are also poised to play a crucial role in attracting visitors. High-profile events, such as the upcoming concert featuring renowned singer Andy Lau, are expected to increase visitor numbers and contribute positively to the local economy. The combination of entertainment and gaming is likely to create a more robust tourism experience, appealing to a broader audience.

However, the industry may encounter some challenges. Local media reports suggest that travel restrictions could arise during the 25th-anniversary celebrations of the Macau Special Administrative Region (SAR). President Xi Jinping’s potential attendance at these festivities may deter some visitors, who could opt to avoid traveling during this period. The anniversary is set for December 20, coinciding with a public holiday that typically sees an influx of tourists.

Despite these challenges, CICC’s outlook aligns with expectations from local tourism authorities. They are gearing up for a busy event calendar in the fourth quarter, coinciding with the Christmas holidays, which are traditionally a peak time for tourism. The authorities have set an ambitious target to welcome 33 million visitors in 2024, representing a nearly 17 percent increase from the previous year. This optimistic projection is bolstered by the recent inclusion of ten more cities in the Individual Visit Scheme (IVS), making it easier for more tourists to visit Macau.

In terms of investment opportunities, CICC maintains a “buy” rating on several gaming stocks. Notably, Galaxy Entertainment is highlighted as a top pick. The company is benefitting from the ongoing ramp-up of its Galaxy Phase 3 project and plans for the mid-2025 opening of the Galaxy Capella Hotel. This new development will feature 36 sky villas and 57 luxury suites, catering to the growing demand for high-end accommodations.

Wynn Macau is another company receiving positive attention. The firm boasts “top-tier customer resources,” positioning it well to capitalize on the wealth effect among its clientele. This advantage may allow Wynn to outperform its competitors as the market continues to evolve.

Data from the Gaming Inspection and Coordination Bureau (DICJ) provides further insights into the current state of Macau’s gaming sector. In the third quarter of 2024, total GGR rose by 13.9 percent year-on-year, although it marked a 1.5 percent decline quarter-on-quarter. Overall, GGR for this period reached 78.5 percent of the total recorded in the third quarter of 2019.

The performance of the mass gaming sector saw a slight decline of 1 percent compared to the previous quarter, yet it managed to recover to 107 percent of 3Q19 levels. In contrast, the VIP gaming sector experienced a more significant challenge, with a 3 percent decrease quarter-on-quarter, recovering only to 42 percent of its 2019 levels.

CICC also forecasts a 5 percent year-on-year increase in industry EBITDA for the third quarter, despite a 2 percent decline quarter-on-quarter, resulting in an estimated $1.93 billion. This figure represents a recovery to 83 percent of 3Q19 levels. The analysis indicates that while total gaming revenue shows some weakness, the reinvestment rate within the industry remains stable, hinting at longer-term optimism.

However, analysts caution that the recovery of the Macau gaming industry is proceeding at a slower pace than anticipated. As competition in the Asian gaming market intensifies, businesses will need to adapt quickly to maintain their market share. Adjustments to revenue forecasts have led CICC to lower its industry EBITDA predictions for 2024 and 2025 by 2 percent and 6 percent, respectively. The expectation is that the industry will recover to 86 percent and 97 percent of 2019 levels in those years.

Read related article: Macau Casino Revenue Soars to $135 Million From Oct 1-6, 2024; Highest Since 2019