Photographer: Xaume Olleros/Bloomberg

Macau Casinos Gain on Better-Than-Expected December Revenue

  • Last month's revenue drop was smallest since January 2014
  • Downturn to continue in 2016 before growth in 2017: analysts

Macau casino shares mostly rose in Hong Kong trading after the world’s largest center of gambling reported gaming revenue for December that was better than most analysts’ expectations.

Gross gaming revenue fell 21.2 percent in December for a 19th straight month of declines, while representing the smallest year-on-year fall since last January. The result was better than most market expectations of a 20 percent to 28 percent decline, according to DS Kim, an analyst at JPMorgan Chase & Co.

Galaxy Entertainment Group Ltd. rose as much as 3.5 percent to HK$25.30, the highest intraday level in almost two months, while Sands China Ltd. climbed as much as 2.5 percent. MGM China Holdings Ltd. and Wynn Macau Ltd. posted small gains, while SJM Holdings Ltd. fell 1.5 percent. The benchmark Hang Seng Index fell 1.5 percent as of 9:50 a.m. local time.

December figure was “about the best we could hope for in terms of finishing the year,” said Grant Govertsen, an analyst with Union Gaming Group. The last two weeks of the year were better than industry expectations including for the mass market and VIP segments, he said, citing conversations with casino industry insiders.

For the full year, gross gaming revenue fell 34.3 percent to 231 billion patacas ($29 billion), compared with the median estimate of a 35 percent decline from nine analysts surveyed by Bloomberg, which ranged from 34 percent to 36 percent.

Macau’s six gambling houses have seen about $45 billion in market value wiped out this year amid a free-fall in casino receipts, as China’s corruption crackdown scared off high-stake players or VIP players and a slowing economy hurt mass-market gambling. Stricter government policies and key personnel changes, including a new regulator and adviser to oversee gambling, could further impact the hard-hit industry.

Still, Govertsen said VIP will face an even tougher 2016 than 2015 and is forecasting a VIP gross gaming revenue decline of 12 percent. 

“Our estimates contemplate continued demand weakness, which will likely be exacerbated by pressures on the regulatory front,” he said, referring to possible tougher restrictions on smoking and junkets, as well as liquidity concern in the industry.

Macau’s casino industry, which raked in gambling revenue about seven times more than the Las Vegas Strip in 2014, has seen its lead on the U.S. casino district narrow to about 4.6 times in the first 11 months of last year amid the slump.

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