The stark contrast in the 2016 earnings announcements by Macau concessionaires SJM and Galaxy this week prove that the city’s road to recovery is very much mass market driven, according to Union Gaming’s Grant Govertsen.
Taking into account for the first time the full financial results of all six concessionaires, the Macau-based analyst says mass has shown itself to be growing considerably faster across the board with only luxury operator Wynn skewing VIP results further north than they really are.
While official DICJ results show VIP growing at 13 percent in 2016 compared to mass market at eight percent, Govertsen believes table reclassification has also caused some disparity with more accurate figures sitting at VIP GGR of +10 percent and mass at +12 percent. Remove Wynn from the equation and mass looks even stronger at +8 percent compared with +1 percent for VIP.
“Despite significant analyst commentary to the contrary, now that we have data from the entire Macau Big 6 our view that mass is still growing faster than VIP has been confirmed,” Govertsen said.
“(There is a) significant disparity between growth rates of mass and VIP and in-line with our thesis that other than special periods like Chinese New Year, mass market should outpace VIP. This, of course, is very positive for the market – not just because mass is a higher quality segment – but because it contributes to diversification within the confines of gaming.”
The majority of mass market growth in 2016 took place in Cotai – which has seen Galaxy Phase 2, Broadway Macau, Studio City, Wynn Palace and The Parisian open their doors over the past two years – with Govertsen predicting mass-centric Galaxy and Sands are best positioned to benefit moving forward.
This week’s earnings announcements showed Galaxy profits up 51 percent in 2016, while the more VIP-driven SJM saw profit fall 5.6 percent.