All that was missing were the locusts.
A slowing Chinese economy, a major storm slamming into the region, and ongoing protests in Hong Kong contributed to the largest Macau casino revenue decline this year and the market’s biggest percentage drop in 27 months.
The gaming revenue dip of 8.6% during August was larger than anticipated by Wall Street and could have an adverse effect on the stock prices of the major Nevada casino companies operating in Macau when the markets open Tuesday after the Labor Day holiday.
Macau’s Gaming Inspection and Coordination said Sunday casinos in China’s only legal gambling market collected $3.03 billion in gaming revenue during August. The figure marked the second straight monthly decline and the fifth time in 2019 Macau’s casino saw a revenue decrease.
“Bottom line is that we would expect to witness a negative reaction to the August Macau gross gaming results given they came in below already muted expectations,” Stifel analyst Steven Wieczynski told investors. “With so many headwinds facing the Macau market in August, we aren’t surprised the actual Macau gross gaming revenue came in below expectations.”
For the first eight months of 2019, Macau gaming revenue is down 1.9% compared to 2018.
“On one hand, gross gaming revenue underperformed even the lowest expectations with year-over-year declines accelerating in the second half of 2019 against easier comparisons than first half,” Macquarie Securities gaming Edward Engel, who is based in Hong Kong, said in a research note Sunday.
“On the other hand, Macau valuations are near 10-year lows where deteriorating fundamentals and macro overhangs already seem priced in.” Engel said.
Las Vegas Sands, Wynn Resorts and MGM Resorts International all operate casinos in Macau. Sands is spending $2 billion over the two years on renovating and enhancing its Macau properties, primarily on rebranding the Sands Cotai Central into The Londoner Macau, $1.35 billion London-themed resort.
Wynn Resorts is also spending $2 billion in Macau to add non-gaming enhancements to a site near the Wynn Palace, including two new hotel towers totaling 1,300 rooms and the Crystal Pavilion complex, which will include an art museum, gardens, an entertainment theater and food and dining venues.
The ongoing trade war with the U.S. had a negative impact on the Chinese economy while continued protests in Hong Kong over an extradition bill proposed by the Special Administrative Region’s government shut down the Hong Kong International Airport over several days, which kept Macau visitors away.
Also, Typhoon Lekima struck Mainland China in August, slowing visitation to Macau early in the month.
Jefferies Gaming analyst David Katz told investors in a research note Sunday the Hong Kong protests actually resulted in mass market customers staying longer in Macau, which has offset weakness in high-end play.
“As for Macau, the messages have been more mixed than expected,” Katz said.
The analyst said a variety of dynamics are affecting Macau, including the newness of the 55-kilometer Hong Kong–Zhuhai–Macau Bridge, which opened last year and connects Macau with Hong Kong by automobile traffic across the South China Sea.
“(With) the pressure from the trade war and continued regulatory pressure on junkets, it remains hard to be bullish (on Macau),” Katz wrote.
Analysts said September is an easy comparison for Macau’s gaming market. Typhoon Mangkut caused casinos for closed for several days a year ago.
In 2018, Macau gaming revenue was $37.6 billion, a 14 percent increase over 2017 and the second consecutive year of gains after a prolonged slump of three years.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
