Macau stocks higher after April revenue tops estimates

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A number of casino stocks rose at the beginning of May, as Macau’s Gaming Inspection and Coordination Bureau posted better-than-expected revenue declines.

 

[dropcap]G[/dropcap]ross gaming revenues for Macau dropped 9.5 per cent to MOP17.3bn (E1.9bn) in April, marking the 23rd consecutive monthly decline for the world’s largest gambling hub. Yet while the latest figures from Macau’s Gaming Inspection and Coordination Bureau (DICJ) seem to offer little recompense to a gambling industry that peaked with a single-month industry high of $4.8bn (E4.2bn) in February 2014, analysts had expected drop in the region of 11-16 per cent, and a number of casino stocks – including Wynn Resorts, Las Vegas Sands and MGM Resorts – rallied on the news.

While opinion is divided as to when exactly Macau’s casino market will bottom out, many industry observers have expressed the opinion that we will see a gradual tapering of GGR declines in the former Portuguese enclave throughout 2016.

Speaking exclusively to International Casino Review, Alex Bumazhny, FitchRatings’ senior director of corporate ratings in the gaming, lodging and leisure sectors, said: “Our negative five per cent Macau gaming revenue growth for 2016 forecast takes a view that the market will continue on a similar trajectory for the remainder of the year. The forecast leaves some room for additional moderate weakness in the VIP segment and assumes slight growth in the mass market driven by the new projects coming online.”

Offering a more positive outlook, Tristan Sjöberg, executive chairman of TCS John Huxley, said: “I am convinced the table games market in Macau will experience stabilisation and growth in 2016, whilst many other parts of Asia will follow suit. I personally think we are now at the bottom of the cycle and that the only way is up, maybe after a brief pause at this level for a month or two, and that towards the end of the year we will be seeing high single-digit growth back in Macau.”

Looking ahead to May, Union Gaming’s Grant Govertsen, a specialist in the Macau casino market, said: “While it is true that the early parts of April were slow, volume began picking up towards month-end with the weekend of the 22nd experiencing solid volumes across all gaming segments.

“This uptick in volume has seemingly carried through to the [early May Labour Day Weekend], as we witnessed very busy casino floors across Macau on Saturday and Sunday. In our view, it is clear the holiday is bringing a real uptick in gaming volumes across the board and we would expect this to carry into the first week.”

Bumazhny added: “We continue to hold a positive view of Macau longer-term as greater China remains a relatively underpenetrated market and, despite the slowdown, we expect China’s middle class to grow. Transportation infrastructure, such as the bridge to Hong Kong, will be a catalyst helping to tap further into China and other markets in the region.”


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