Macau’s casino stocks tumbled after several analysts slashed their forecasts for June gambling revenue in the world’s largest gambling hub.
Analysts said overnight that June’s casino revenue will be below their initial estimates because of weaker-than-expected figures in the first week of the month.
Melco Crown Entertainment Ltd. is leading a decline in casino stocks in Hong Kong trading, down 5.1 percent to HK$50.85, the biggest loss in three months. Wynn Macau Ltd. lost 4.5 percent, Galaxy Entertainment Group Ltd. dropped 3.7 percent and the Macau unit of Las Vegas Sands Corp. fell 1.7 percent.
“Our channel checks indicate that last week’s industry revenues were meaningfully hurt by the bad luck factor almost across the board,” DS Kim, an analyst at JPMorgan Chase & Co., wrote in a note. “Such a disappointing start to the month suggests downside risk to our current gross gaming revenue forecast.” The bad luck factor means the house won less.
The forecast cuts added to the negative sentiment already felt in the Macau casino industry as casinos there saw a yearlong losing streak and the city’s economic output tumbled 24.5 percent in the first half, more than Greece and Ukraine ever did. More than $25 billion in market value of Macau’s six casino operators has been wiped out so far this year.
If gaming demand fails to improve in the coming weeks, “the downside could become more significant, which could ignite a meaningful de-rating for the sector,” said Kim, who had predicted a decline of 30 percent to 32 percent this month.
Tim Craighead, an analyst at Bloomberg Intelligence, said casino revenue might stabilize as summer holiday travel starts to pick up.
“The key thing now is to see a basic level of stabilization and then we’ll be in for another battle later in the year,” with China’s economic stimulus and the property market beginning to recover again, as well as a new casino opening later this year going up against a possible extension of the casinos’ smoking ban to VIP rooms, Craighead said.