Macau regulator not worried by GGR decline: CIMB

The nine-month run of decline in Macau gross gaming revenue (GGR) is “not a major concern” for the city’s government, reported brokerage CIMB Securities Ltd, citing the local gaming regulator.

The report from Michael Ting and Jensen Poon, Hong Kong-based investment analysts, said that stance had been “implied” at a recent meeting CIMB had with the Gaming Inspection and Coordination Bureau, also known as DICJ.

“Our main motivation to meet with the DICJ was to gather its views on what positive policy measures can be enacted to help stop the trend of negative gaming revenue growth,” said the analysts.

“Much to our surprise, the DICJ implied that the current negative run-rate of gaming revenues is so far not a major concern,” they added.

Macau is expected to announce official figures for March casino GGR this week. Investment analysts last week said they expected Macau to record a year-on-year decline in March GGR of 35 percent or more, affected in part by mainland China’s ongoing anti-corruption drive. It would extend the city’s losing streak on GGR growth to 10 months.

The anti-graft campaign is being complemented in Macau by local government promises to tighten regulation and oversight of the casino industry.

Macau’s Chief Executive Fernando Chui Sai On, in his annual policy address on March 23, predicted GGR to reach an average monthly run rate of MOP20 billion (US$2.5 billion), which implies GGR for 2015 being down 31 percent year-on-year.

“Based on our conversations, the DICJ internally believes that this forecast is too bearish. Even if GGR were to fall 31 percent this year to MOP243 billion, the six licensed operators would still be able to achieve positive operating profit, which is a key metric,” said CIMB in its note on Friday.

“Hence, despite Macau’s reliance on the gaming industry for tax receipts, we have not yet reached a crisis point where policy negotiations need to be held between the mainland and Macau governments to stop the bleeding from negative gaming growth,” said the research team in its analysis of DICJ’s position.

The Macau government has amended the budget proposal for 2015, cutting its revenue forecast to MOP119.97 billion, from the original forecast in November of MOP154.66 billion. The government collected a total of MOP16.95 billion in direct taxes from gaming in the first two months of 2015, down by 24.0 percent year-on-year, according to official data.

CIMB added that the gaming regulator indicated that as gaming revenue falls, “DICJ views this as an opportune time to further promote the development of the non-gaming aspects of the gaming business, in addition to enabling the economy to diversify away from gaming activities”.