A number of things going on. The market is digesting the big move back from $30-31. GGR will still be effected by the WC in July. VIP predictions are for a poor H2 performance. Some may be on the fence until the effect of the smoking ban is sorted out. Q2 reports will be in line but not the beats we are used to.
What isn't yet being taken in to account is likely better than expected GDP and GGR for the second half.
BEIJING (Caixin Online) — Fresh approach effectively cuts ratio by 2 percentage points, Shenyin & Wanguo Securities says, but it’s unclear if that will spur lending
(Beijing) – The new method for calculating the loan-to-deposit ratio can unfreeze up to 2 trillion yuan for banks to extend loans, the brokerage firm Shenyin & Wanguo Securities said in its research report.
Starting in July, banks no longer need to count six types of funds as loans in the ratio, which is legally required to not exceed 75 percent. The regulator uses the ratio to pace money supply and ensure banks have enough cash in reserve.
The new calculating rules, announced by the regulator on June 30, also added two sources of funds to the deposit side, including large-sum certificates of deposit (CDs) to companies and individuals, which have not been issued yet.
Chinese regulators increased banks’ capacity to lend money and bolster the slowing economy by changing the way loan-to-deposit ratios are devised.
Banks from today can include in the calculation negotiable certificates of deposit sold to companies or individuals, the China Banking Regulatory Commission said in a statement yesterday. They can also exclude loans advanced to small enterprises and the rural sector that are backed by bonds, the CBRC said. Bank lending is capped at no more than 75 percent of deposits to prevent an overextension of credit.
The changes in calculation may allow lenders such as Bank of Communications Co., which was approaching its limit under the previous methodology, to lower its ratio and advance more loans. Premier Li Keqiang is seeking to cut funding costs and feed credit into the world’s second-largest economy, which is forecast to expand in 2014 at the weakest pace in 24 years.
Thanks squeeze. Morgan's brilliant analysis not only still includes the now totally debunked effect from UnionPay but also the pearl of wisdom that mass YoY comps will become "challenged" starting in the fall. Gee wiz, I wonder if mass is experiencing the same phenomenon as overall GGR, with large % gains becoming more difficult to achieve against the backdrop of a larger base number? Also, did they forget about 2015's casino openings and continued mass transport improvements?
6883.HK was up nicely last night, on well over 2x normal volume. The WC is ending soon so the focus swings to things picking up in mid-July, the opening of COD Manila, and the seasonally strong Q4 in Macau around the corner.
We believe a labor solution will be found longer-term, especially given other Macau businesses (independent restaurants, small banks, etc), which rely on Macau resident labor, could continue to lose headcount to higher-paying Macau casinos. The drain away from these businesses leads to less diverse offerings on the Island – and more diverse offerings are a stated goal of the Macau Government.
Market Share. According to our checks, table-only market share through June 29 is: SJM at 25.6% (vs. table-only May share of ~23.6%), Galaxy at 215% (vs. ~21.6%), LVS at 21.4% (vs. ~22.9%), MPEL at 11.5% (vs. ~12.6%), WYNN at 9.5% (vs. ~10.2%), and MGM at 10.5% (vs. ~9.1%).
June headwinds linger; Unemployment rate continues as a challenge
According to our channel checks, Macau table-only gross gaming revenue (“GGR”) is MOP24.7b (USD$3.1b) through June 29. The June GGR run-rate is -6% year-over-year (“YoY”) at MOP26.5b (USD$3.3b), including slot assumptions. We tighten our June GGR outlook to -6% YoY from -2% to -6%. Our full year CY14 GGR estimate remains +11% and we expect post World Cup pent-up demand to positively influence the back half of July.
As expected, the World Cup continues to be a drag on Macau GGR, which was down ~1% week-over-week. World Cup headwinds should continue until the conclusion of the competition on July 13, in our view. This once in every 4 year disruption to GGR does not change our positive long-term secular outlook for Macau names.
Unemployment rate. Macau’s unemployment remained 1.7% in May. In essence, if you are not working in Macau, it is because you do not want to.
Unemployment - Positives and negatives. While the low unemployment rate presents Beijing with a success story for its one country two system policy making major policy shifts toward the Island unlikely, it continues to present a significant staffing challenge for upcoming Macau casino openings slated for 2015 – 2017.
Unemployment - Longer-term solution likely (though timing uncertain). While certain options have been presented internally within the Macau Government to relax certain labor restrictions - namely to allow for non-Macau residents to hold certain positions that can only currently be assumed by Macau residents, such as dealers - pushback from locals has prevented any true political progress to date.
I found the most entertaining aspect of the piece being the pivot to using p/e for MPEL as a comparative valuation, after talking up MGM, while MGM sports a p/e of 50 to MPEL's 20 based on 2014 EPS estimates. Not that it's the first time logic has been tortured by these fools to arrive at a goofy conclusion.
An awful lot of market cap, not to mention investor profit, got wiped out over this "never mind" mishap, characterized as what.....misunderstanding.........lack of clarity.........a "failure to communicate" moment.
Is there a translation problem in Macau? Couldn't Tam's office have made their intentions known weeks ago? Some would say water under the bridge but that isn't how it works with money on the line.
Anybody out there old enough to get the references to a TV show and a movie?
You can go all the way back to the time this story first broke and read Bain's take, which was that there was really no change in the fundamental policy regarding UnionPay cards. He followed up that published interpretation with a more private comment saying the only change effecting gamblers was rather than using a card machine on the gaming floor patrons would have to walk an extra distance to use their cards INSIDE THE CASINO COMPLEX but off the gaming floor.
Hopefully today's clarification puts this fear mongering story to rest.
Let this be a lesson to everyone paying attention to the media coverage of the sector. There is a very long track record of over hyped "THE WOLF IS AT THE DOOR" stories on gaming in Macau that over and over turn out to be completely inaccurate. Whether these stories are orchestrated by shorts......I don't know. I do know the people writing them are appallingly ignorant about how gaming in Macau works.
So next time you read something that sounds horrible don't panis and sell your shares. It's probably just nonsense.
Essentially the analyst is saying while he thinks investors will not be attracted to the shares because of any near term events causing upside revisions to earnings (the subtext being he thinks retail is too dumb to understand what is coming) he sees the stocks going sideways.
Apparently he fails to appreciate that those reading this board understand more about the dynamics effecting the concessionaires than he does and consequently they don't need a shiny ball dangling in front of them to decide to buy an extremely under valued stock.
I suppose we've beaten that one like a drum but for good reason. The majority of the writers following the space are coming around though it has taken a number of analyst notes (like Bain's) for it to sink in.
As for COD Manila, according to Morgan they are going to record a loss in Q4 from Manila since they indicated the divi would decline and that is the only way it would happen as far as I can tell.
"proactive operator table transitions to mass from VIP have caused a 12-month slow-bleed to overall Macau GGR prior to new openings."
So the next time the market makes a knee-jerk reaction to GGR "shortfalls" you can smile a wry smile knowing it is, in part, by design with the silver lining being less revenue doesn't mean less profit, it means revenue of higher quality that is 3x more profitable.
"New limits on how much local junket operators can lend to gamblers have recently cooled shares of once-hot casino stocks such as Sands"
There are no limitations on what junkets can loan to clients other than ones that are self-imposed.
Keep in mind that one of their junkets shut down operations recently with those tables being allocated to mass/premium mass. So MPEL's share of GGR gets reduced as the focus of their biz plan continues to move to higher margin non-VIP play. Expect to see a marked improvement in share when MSC opens next year. For now be comforted in the knowledge the GGR share reduction can still translate to higher EBITDA due to superior margins (3x better than VIP) from mass tables.
Moving from OMG!!!!!!!!!!!!!! (UnionPay, junkets, visas, WC, VIP!!!) to this is an explanable slowdown for a number of known, somewhat temporary reasons, BUY for the long term reward.
June Macau GGR: Trending slightly negative, as expected; Visitation strength continues
According to our channel checks, Macau table-only gross gaming revenue (“GGR”) is MOP19.2b (USD$2.3b) through June 22. The June GGR run-rate is -4% year-over-year (“YoY”) at MOP27.2b (USD$3.4b), including slot assumptions. We lower our June GGR outlook to -2% to -6% from -2% and +3% (recall we already had a bias toward the low end of our initial range). Our full year CY14 GGR estimate remains +11% and we expect post World Cup pent-up demand to positively influence the back half of July.
GGR headwinds from the World Cup have begun. The World Cup began June 12 and ends July 13. This once in every 4 year disruption to GGR does not change our long-term secular outlook and we would use any corresponding stock weakness as a buying opportunity.
During the last World Cup (2010), June GGR declined from May by 20%. If we were to assume June 2014 declines 20% from May 2014, June 2014 GGR would end at -8% YoY.
Interestingly, in July 2010, MoM GGR accelerated to +18% versus its average of +9% and last year’s result of +4%.
We believe post-World Cup pent-up demand positively influenced the back half of July 2010 and we expect a similar trend this year (though we note a mitigating effect of an upcoming high-hold VIP comparison next month).
Visitation. May visitation was up 8% YoY, driven by a 14% increase in Mainland arrivals. Year-to-date visitation is +9% versus +3% for the same period last year.
We continue to believe augmented visitation trends strengthen our long-term secular thesis driven by mass growth and upcoming new supply.
Market Share. According to our checks, table-only market share through June 22 is: SJM at 25.5% (vs. table-only May share of ~23.6%), Galaxy at 20.0% (vs. ~21.6%), LVS at 22.6% (vs. ~22.9%), MPEL at 11.1% (vs. ~12.6%), WYNN at 9.8% (vs. ~10.2%), and MGM at 11.0% (vs. ~9.1%).
This is copied from an article that can be found on the LVS page at Yahoo. McKnight is predicting MPEL will hit the Q2 numbers despite the GGR slowdown, clearly due to its mass weighting.
"Wells Fargo does not expect “significant” earnings beats in the second quarter. Using negative one percent growth in June (negative 15 percent VIP and 30 percent mass) and market share prices as of June 15, the analyst estimates are 3%/6%/0%/5% below consensus for LVS/WYNN/MPEL/MGM, respectively."