Macau’s casino market produced its highest single-month revenue total in four years during October.
That fact alone spurred interest in U.S. gaming company stocks that operate properties in the Chinese Special Administrative Region.
China’s government in Beijing, however, provided an additional lift last week, indicating support for economic stimulus policies that could ultimately boost increased visitation to Macau. According to the South China Morning Post in Hong Kong, Chinese leaders acknowledged a negative impact from the growing trade war with the U.S. and they need to improve the gloomy outlook.
That recognition – the day Macau’s gaming revenue totals for October was announced – helped push the stock prices of Las Vegas Sands, MGM Resorts International and Wynn Resorts to some of their highest closing numbers in several months.
It’s still questionable if the goodwill made for just a one-day event.
Macau casinos collected $3.38 billion from gamblers during October according to Macau’s Gaming Inspection and Coordination Bureau. The total was the largest figure since October 2014. However, the percentage increase from a year ago – 2.6 percent – was the smallest increase since August 2016.
“While the results were slightly better than expected, the overall trend line in the market continues to temper our outlook, which is further pressured by the tough comparisons in the upcoming months,” said Jefferies gaming analyst David Katz.
Credit Suisse gaming analyst Cameron McKnight told investors Macau’s October figures pointed toward a marked “deceleration” of revenue growth in the next 12 months and were “inline” with weak expectations.
“(We) generally have a more ‘glass half empty’ view (of Macau),” McKnight said.
Notwithstanding, Macau-facing gaming stocks had a positive reaction to events surrounding the market on Thursday. Las Vegas Sands and Wynn Resorts were each up almost 12 percent. MGM Resorts International grew more than 4.5 percent. Melco Resorts and Studio City Casino, which are based in Asia but are traded on the Nasdaq, both recorded double-digit increases.
On Friday, Las Vegas Sands was the only company of the group to lose ground, but the decline was 1.4 percent.
So, where is the Macau gaming market – which went on a three-year slide after reaching an all-time high of $45 billion in 2013 – headed?
Deutsche Bank’s Carlo Santarelli said the October numbers were “indicative of continued slowing in the (high-end customer) segment.” Stifel gaming analyst Steve Wieczynski said the October result “could actually be viewed somewhat positively given the negativity around Macau in general right now.”
Throwing some additional analysis into the market was Union Gaming Group’s Grant Govertsen, who has been based in Macau for almost a decade. He told investors Macau’s casino revenues are currently 14.3 percent ahead of last year’s $33.2 billion total with two months left in 2017.
Macau has seen 27 straight months of gaming revenue increases.
October 2018 was also going up against a tough comparison with October 2017, which saw a 22 percent revenue increase.
A positive, Govertsen said, was the opening last month of the $20 billion Hong Kong–Zhuhai–Macau Bridge, a 34-mile bridge and tunnel system that took nine years to build and is the longest sea-crossing bridge ever constructed.
The bridge will cut driving times between the cities from three hours to just 30 minutes, which Chinese officials say will enable commuters and tourists to easily move around the region.
Govertsen said Chinese President Xi Jinping’s trip to Hong Kong and Macau to attend the bridge opening might have hurt gaming revenue during the visit.
“Any time a high-ranking official visits the region it has an impact on Macau,” Govertsen said.
Looking ahead, Credit Suisse’s McKnight warned the licensing renewals for Macau’s casino operators “is now raised in almost every investor meeting and has been a constant question on recent earnings calls.” The licenses begin to come up for renewal in 2020.
“With no government policy framework, uncertainty is likely to continue to reign,” McKnight said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
