Inside Asian Gaming

INSIDE ASIAN GAMING SEPTEMBER 2018 22 Going forward, analysts see catalysts in place or reliably in the pipeline to drive continued growth, especially on the mass side, offsetting potential high-end headwinds. The impending launch of the Hong Kong-Zhuhai-Macau Bridge will help lift Macau to the next level. COVER STORY time outbound visitors. Additionally, the mass segment generates the highest profit margin on a dollar-to-dollar basis. From a volume perspective, they also have much higher demand for lodging, F&B, entertainment and other leisure demands, boding well for future profit growth going forward.” Bernstein projects mass will continue to headline growth, advancing 17% this year versus VIP up 11%, then 8% next year with flat VIP revenue and growing 14% in 2020 with VIP expanding 10%. While that may not get punters’ blood pumping compared with headier times just months ago, the investment advisory points out that Macau gaming revenue’s 2010-2016 compound annual growth rate was 3%, on mass growth of 15% and VIP decline of 5%. For 2017- 2022, Bernstein estimates CAGR of 10% on mass expansion of 12% and VIP growth of 7%. Clearly, that’s progress. RETAKING THE PEAK Perhaps most encouraging, despite the GGR disappointments, second quarter EBITDA for the six Macau gaming concessionaires grew 21% year-on-year, according to Bernstein. On an industry-wide basis, EBITDA for the last four reported quarters is on par with the peak period of 2Q13 through 1Q14, and the profitability outlook remains healthy. “For major IRs in Macau, the average EBITDA margin remains in the mid-20s range, which may not be as great as those in Singapore or Cambodia primarily due to the high tax rate of nearly 40% in Macau,” Zhu says. “But given the large revenue base and the future potential of the market, investment returns are certainly acceptable.” Going forward, analysts see catalysts in place or reliably in the