A gaming analyst lowered his expectations for the Macau market Monday, but not over fears that a U.S.-China trade war would soften baccarat business.
In a report to investors, Union Gaming Group analyst Grant Govertsen said bad luck at casinos operated by MGM Resorts International Melco softened casino winnings and fattened the bank rolls of high-end baccarat players.
Meanwhile, increased play from mass market customers – primarily middle-class visitors from Mainland China – helped soften the blow. Govertsen said the mass market “has been the backbone” in Macau’s gaming revenue recovery over the last 18 months.
Still, Govertsen expects Macau’s gross gaming revenue growth will be up 16 percent in all of 2018, a modest decline from previous expectations.
What won’t harm numbers, Govertsen said, is a trade war between the U.S. and China.
Govertsen, who is based in Macau, told investors most regulatory fears in Macau “remain unfulfilled.” He said money exchange kiosks on the China-side of the border have reopened and UnionPay shops on Cotai are operating as usual.
“To the extent broader capital controls have weighed on Macau via some of the more recent actions taken against underground banking, there has been no specific targeting of Macau,” Govertsen wrote.
In addition, Govertsen said, “We have heard nothing on the ground that suggests any of the operators are potential political targets as it relates to trade war fears, although this would require direct intervention by China to accomplish.”
Last week, a Hong Kong-based risk management firm said Macau’s gaming sector is “highly exposed” in the developing trade conflict.
In a report posted to its website, Steve Vickers & Associates which advises financial institutions, private equity firms and other businesses and individuals, said the trade conflict between the U.S. and China will “alter the shape of commercial activity across Asia,” harming some companies, but presenting opportunities to others.
Macau has the largest gaming marketing in the world, producing $33 billion in revenue last year, a 19 percent increase and the first annual gain since 2013. The market is up around 20 percent this year.
Three Nevada-based casino operators, MGM Resorts International, Wynn Resorts and Las Vegas Sands Corp., operate a large collection of Macau casinos.
Meanwhile, Jefferies gaming analyst David Katz told investors there was a “slight acceleration” in gaming in the past week, primarily due to stronger high-end volume.
“We view these estimates in the context of the tough (comparisons), the variability of intra-month estimates and uncertain China macro,” Katz said. “Nonetheless, we focus on long-term value potential and believe the headwinds for MGM, Wynn Resorts and Las Vegas Sands are priced in.”
On Monday shares if MGM Resorts grew 17 or 0.55 percent to close at $31.12 on the New York Stock Exchange. Wynn Resorts was up 79 cents or 0.48 percent to close at $166.03 on the Nasdaq, while Las Vegas Sands closed at $74.08 on New York Stock Exchange, up 35 cents or 0.47 percent.
Howard Stutz is the executive editor of CDC Gaming. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
