Galaxy Leads Casino Drop as Macau’s Revenue Growth Slows

Galaxy Entertainment Group Ltd. fell the most in almost a month in Hong Kong trading, leading declines among casino operators as Macau gambling revenue grew by the slowest in four months.

Macau casino revenue rose 9.3 percent to 32.4 billion patacas ($4.1 billion) last month, according to data on the website of the city’s Gaming Inspection and Coordination Bureau. The growth was lower than the median estimate of 14.5 percent from seven analysts surveyed by Bloomberg News.

“It’s a little disappointing,” Aaron Fischer, head of consumer research at CLSA Ltd. said by phone after the revenue report. “It indicated there’s a sharp drop at the end of month.”

Government limits on gambling tables have slowed capacity growth in Macau, after a 10-year boom transformed the southern Chinese city into the world’s biggest casino hub. Growth has also slowed amid concern a government crackdown on unauthorized debit card transactions made it more difficult for some gamblers to get cash.

Galaxy Entertainment fell 3.1 percent to HK$60.05, the biggest drop since May 8, at the close of Hong Kong trading. SJM Holdings Ltd., Asia’s largest casino operator by revenue, slumped in the morning trading session, then extended the decline to 3.2 percent after the revenue figures were announced to close at HK$21.55. Sands China Ltd. fell 1.4 percent and Wynn Macau Ltd. declined 1.2 percent. The city’s benchmark Hang Seng Index rose 0.9 percent.

VIP Segment

Casinos in Macau, the only place they’re legal in China, rely on high-rollers or VIP clients brought in by junket operators for more than 60 percent of revenue. The segment is usually defined as customers who wager at least HK$5 million ($645,000) per trip.

Resorts have sought to lessen that dependence by increasing the number of hotel rooms available and adding entertainment venues to lure more middle-class gamblers.

“The VIP segment is likely tracking below expectations,” Grant Govertsen, a Macau-based analyst at Union Gaming Group, wrote in a research note today. That’s partly because a nationwide anti-corruption crackdown by the government is discouraging some gamblers and because China’s economic growth is cooling, he said.

Mass Strength

Macau casino revenue will probably grow 14 percent this year as “mass market appears to remain very strong,” Govertsen added. His estimate is unchanged from levels before today’s figures were announced, he said.

CLSA’s Fischer also said he expects revenue to grow “at the mid-teens level” this year, partly on support from the mass-gaming segment.

Casino operators face land and labor constraints in Macau, a city about half the size of Manhattan. The Macau government has limited the number of gaming tables and caps the growth at 3 percent annually in the next 10 years to prevent the industry from growing too fast.

Gambling revenue in Macau rose 20 percent to 102.2 billion patacas in the first quarter.

China’s economy expanded 7.4 percent in the first three months of this year, the slowest since 2012.

Before it's here, it's on the Bloomberg Terminal.