Macau’s surprising performance in August has given renewed optimism for the market.
Gaming revenue in Macau has increased for 25 straight months. But August’s 17 percent jump from a year ago to $3.3 billion provided a figure second only to February, which included the popular Chinese New Year Holiday
“Given the solid result and favorable visa revisions in late August, we think sentiment towards Macau is likely to begin to improve as we head into year-end,” Deutsche Bank gaming analyst Carlo Santarelli told investors in a research note over Labor Day weekend.
But, he cautioned, there are still lingering worries over China’s economic slowdown and a potential trade war with the U.S.
“Both July and August have outperformed sequential expectations,” Santarelli said. “We expect September to maintain this momentum.”
Over the last six years, Santarelli pointed out, September gaming revenues have been been roughly 4 percent lower than August results.
In a separate research note Monday, Santarelli said he expects shares of Wynn Resorts Ltd. “to trade primarily on Macau fundamentals and broader China macro sentiment.”
Wynn Resorts, in early August, reported steep declines in second-quarter results for its first casino in Macau, driven by a decline in betting by high-rollers.
Wynn, Las Vegas Sands Corp., and MGM Resorts International operate large casino holdings in Macau.
For the first eight months of 2018, Macau, the world’s largest gaming market, is up 17.5 percent over 2017’s totals.
Credit Suisse gaming analyst Cameron McKnight told investors Macau had some positive momentum in recent weeks. China announced easier visa requirements for 8 million citizens to enter Hong Kong and Macau. The change speeds the visa process for migrant workers and permits them to join tour groups in Macau.
“We think it signals the Pearl River Delta integration is real, and a genuine long-term secular driver,” McKnight said. However, he said migrant worker and tour groups are “generally lower value” customers and won’t have much impact on casino profits.
He added that China has placed a high priority on economic stimulus to deflect any concerns over a possible U.S. trade conflict.
Still, despite August’s revenue totals, McKnight is maintaining neutral ratings on Sands, MGM and Wynn.
“We see a very positive long-term secular story, but potential macro, policy and geopolitical risks keep us on the sidelines,” McKnight said.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter
