Macau’s VIP growth could be unsustainable

Nomura reported that the VIP revenue increase in Macau is likely too high for the government’s taste.

Macau.- Japanese brokerage Nomura said in a Monday note that the recent increase in the VIP sector in Macau is probably unsustainable and too high for what the government is comfortable with. The VIP sector grew 34.8 percent year-on-year during the second quarter.

As it was reported yesterday, VIP baccarat GGR during the three month period from April to June was approximately US$4.4 billion, up from the US$3.2 billion registered during the same three months in 2016. Moreover, the aggregate for all casino GGR during the second quarter was 21.9 percent higher than last year. The numbers were released by the Gaming Inspection and Coordination Bureau.

“We believe the year-on-year comparisons for VIP and mass were probably affected by table reclassifications, which in the first quarter resulted in DICJ-reported VIP revenue growth that was 800 basis points higher than what the operators reported (DICJ-reported mass revenues were 500 basis points lower than reported),” said Nomura in the report. “If the first quarter’s [reporting] differential [is] repeated [extrapolated], then the mix reported by companies in the second quarter will be 12 percent mass and 27 percent VIP [year-on-year growth], which is still likely skewed too high for the government’s taste,” it continued.

Moreover, the brokerage said that investors should proceed with caution since a significantly higher mix of VIP versus mass revenues is an unwelcome combination. “We do not believe Beijing has changed its view on either corruption or the illicit movement of renminbi [Chinese currency] from the mainland,” revealed GGRAsia.