Macau Casino Shares Rise on Sign Industry Approaching Bottom

Updated on
Macau's Gaming Revenue
VIP gaming in Macau has been hit by President Xi Jinping’s campaign on graft that snared thousands of officials and is expanding to include executives at state-owned enterprises. Photographer: Jerome Favre/Bloomberg

Macau’s casino shares rose in Hong Kong trading on signs that the industry’s slump is approaching a bottom.

Wynn Macau Ltd. rose 4.8 percent to HK$16.54 by the close of trading, the biggest gain since April 9. Sands China Ltd. gained 3.3 percent and Galaxy Entertainment Group Ltd. advanced 3.1 percent, while the Hang Seng Index was little changed.

Gross gaming revenue in the world’s largest gambling hub fell 39 percent to 19.2 billion patacas ($2.4 billion) last month, meeting a median estimate of a 39 percent decline from eight analysts surveyed by Bloomberg. The drop has slowed for a second consecutive month.

“Investors are really just focused on trying to find stabilization or a bottoming,” said Vitaly Umansky, an analyst at Sanford Bernstein. “As long as things aren’t deteriorating, things seemed to be fairly consistent, that’s probably a decent sign from an investor’s perspective.”

Macau’s casino industry is being hit by a slump in VIP gaming as President Xi Jinping’s campaign on graft snared thousands of officials and is expanding to include executives at state-owned enterprises. Demand is further damped by China’s economic slowdown even as operators such as Sands China Ltd. are building diversified resorts and hotels to draw more mass-market clients to Macau.

April’s figure, the 11th straight month of decline, followed a 39.4 percent and 48.6 percent drop in March and February, according to data from Macau’s Gaming Inspection and Coordination Bureau. In the first four months, revenue fell 37 percent to 83.9 billion patacas.

New Resorts

Two new major integrated resorts scheduled to open this year, and Wynn Macau Ltd.’s renovation of its mass-market gaming floor could revive a “build it and they will come” boom, according to Bloomberg Intelligence analyst Tim Craighead.

Billionaire Steve Wynn last week urged the local government to provide clarity on its plans as Wynn Macau’s Las Vegas-based parent cut its dividend, describing uncertainty in the Chinese city as the “plaguing word of the day”.

Chinese visitors to Macau fell by 17.6 percent in March, the city’s Statistics and Census Service said on its website on April 27.

The visitor slump “may reflect slower economic growth in mainland China, and comes as complaints rise in Macau about Chinese tourists over-running the city,” said Craighead. Visits may pick up again with the opening of Galaxy’s new projects on May 27, he said.

Casinos are tacking on shops, restaurants, entertainment shows and other non-gaming attractions to draw more middle-class consumers and tourists. The Galaxy Macau’s phase two expansion and Broadway at Galaxy Macau will be the first to open among the city’s six major casino operators building new and expanded resorts.

No Magic Bullet

“What investors will be focusing on will be a continuation of stabilization” of Macau’s gross gambling revenue, said Umansky of Sanford Bernstein. “With Galaxy’s opening, it’s not going to be a magic bullet in the first couple of weeks of its opening.”

Analysts are watching to see if the government will allocate to operators the number of gambling tables that they have requested for the resorts, even as the city’s Chief Executive Fernando Chui pledged a five-year plan to make it less dependent on casinos by diversifying the economy and transform itself into a global tourism center.

Galaxy Entertainment is likely to get approval for about 150 new gambling tables for the phase two expansion, and may open Broadway Macau with between 30 to 40 tables reallocated from an older project, Jamie Soo, an analyst at Daiwa Securities Co. wrote in a note.

SJM Holdings Ltd. and MGM China Holdings Ltd. rose 3.1 percent and 2.7 percent respectively, and Melco Crown Entertainment Ltd. gained 1.5 percent.

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