Macau’s figures continue to silence its critics, posting the fourth consecutive month of accelerating gaming growth, largely thanks to a healthy dose of VIP.
[dropcap]T[/dropcap]he gambling mecca of Macau has already penned in a staggering 14.4 percent uplift in gaming revenues for November – its fourth consecutive month of exponential growth.
These latest monthly figures – $2.35bn – far outstrip even the upper end of the more generous of analyst projections for the month, leaving no doubt that the jurisdiction’s fortunes are finally reversing.
“November was a great month, no two ways about it,” said analysts at JP Morgan Securities, DS Kim and Sean Zhang.
The bank attributed the boost in growth primarily to VIP revenue, up by some 15 percent, the report based on the performance of junkets. According to Kim and Zhang, favourable macro conditions in mainland China contributed to the rise in VIP, such as a property price rally and rising coal and steel indexes. Yet two new resorts, and crucially, a “less intense” anti-corruption campaign have also fuelled the high-roller boom.
Healthier junket trends recorded mid-month also led Credit Suisse to upgrade a handful of Macau-based companies. Shortly after, casino operator stocks began to rally, as investors piled in on what looked to be sure signs of a solid recovery.
Wynn’s shares leapt six percent; Las Vegas Sands by 6.2; MGM Resorts by 2.4 and Melco Crown jumped by 3.3 percent. Even Crown Resorts saw its stock fly up, regaining a good chunk of its losses from last month’s direct-marketing fiasco.
Negative knee-jerk reaction on this headline would provide an even better buying opportunity for investors.
The Swiss bank also cited an easing of controls on Macau and the consolidation of junkets as the key factor in restoring Macau’s VIP revenues, demand for whom has increased since the Crown arrests in October. Taken together it sees the city at the start of a “recovery cycle” that could last for two years.
“As the volume is now concentrated among the top junkets, which have a much stronger balance sheet (to grow business), better internal control system (to comply with the new junket regulation) and agents network (to source players and managing fund flow), we believe this provides a solid foundation for healthy growth in 2017,” said Kenneth Fong, analyst at Credit Suisse. “As the anti-corruption campaign normalises, we believe VIP revenue will gradually reflect the true underlying demand.”
However, optimism was complicated towards the end of the month when Teledifusão de Macau reported that inbound travellers may be required to disclose cash of more than $15,000, potentially undermining the VIP renaissance.
Shares in Wynn, Sands and Galaxy were swiftly cut by between 4 and 5 percent, but recovered almost immediately, suggesting the activity was more cynical than evaluative.
“Negative knee-jerk reaction on this headline would provide an even better buying opportunity for investors,” tempered JP Morgan’s Kim, who added that such a move, if material “does not have anything to do with China’s capital control, nor does it target the gaming industry.”