As Chinese and VIP clients vanish.
Having grown at a breakneck speed of 24% CAGR from 2009-14, the Asia GGR pie is set to decline by an 8% CAGR from 2014-17E.
According to a research note from Macquarie Research, the new gaming world is described as no growth, falling returns.
It expects as much as US$17bn of Asia GGR to disappear in 2015E (-28% YoY) led by a US$15bn decline in Chinese GGR (-32% YoY), mostly VIP (-US$11bn, -34% YoY).
While it expects a marginal 3-6% recovery in Asia GGR in 2016-17E, this will be largely driven by capacity additions over the next 24 months (+35%), which will lead to further deterioration of returns (Asia net margin -510bps from 2014-17E).
Here's more from Macquarie Research:
Chinese losing influence; mass gaining importance: Our bottom-up country analysis suggests Greenfield capacity will drive non-Chinese penetration in the ex-Macau region, leading to 11-13% GGR growth in non-Chinese players in 2016-17 vs only 0-3% growth in Chinese.
We also expect mass players to continue gaining prominence over VIP (mass share already at 49% vs only 36% in 2011) with ~7% growth vs ~2% for VIP.
Introducing – Macquarie Asia Gaming Framework (MAGF): Through extensive bottom-up analysis, we have developed the MAGF, which will provide a framework to look across the 8 countries and 17 casino stocks in Asia.
Australia and Malaysia stand out on the MAGF:
Positive view – Australia and Malaysia: Organic growth and improving returns aided by weak currencies, increasing Chinese/non-Chinese visitation, high div yields and cheap valuations make Australia & Malaysia our top picks.
Neutral to negative view – Singapore and Philippines: While Singapore as a mature market provides flat growth and returns at a cheap price, Philippines as a new market has high growth but falling returns at an expensive price.
Negative view – Macau and Korea: The 2 most expensive markets are also contracting due to Chinese and VIP overdependence, along with declining returns / profitability due to Greenfield expansion.
Our 5 top picks out of 17 stocks stand out on the MAGF While both Australian casinos (Echo and Crown) stand out, GENM, GENS and BLOOM also score better vs peers on the MAGF.
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