Macau Gaming Growth Misses Estimate With Slow Holiday Start

  • Revenue rises 3.1 percent, compared with 8.5% median estimate
  • First few days of Chinese holiday generally slower for gaming

Macau Casino Sales Miss Estimates

Casino revenue growth in Macau slowed in January, falling short of analysts’ estimates in what may be a bumpy recovery from a two-year slump for the world’s largest gaming hub.

Gross gaming receipts rose 3.1 percent to 19.3 billion patacas ($2.4 billion), according to data released by Macau’s Gaming Inspection and Coordination Bureau on Wednesday. That follows an 8 percent increase in December and compares with the median estimate of an 8.5 percent expansion by analysts surveyed by Bloomberg.

Casino stocks fell in the U.S. and Hong Kong. Operators in the lone legal gambling center in China are switching gears to woo tourists and casual gamblers with family-friendly resorts, including Wynn Resorts Ltd.’s Palace casino with its synchronized fountains and Las Vegas Sands Corp.’s Parisian complete with a replica of the Eiffel Tower. While a recovery of the $30 billion industry has been gathering momentum after high-stakes players were driven away by China’s anti-corruption drive, growth at the new casinos also bring risks.

“People are still concerned about the Chinese economy and anti-corruption,” said Michael Ting, a Hong Kong-based analyst at CIMB Group Holdings Ltd. “The worst is over but Macau’s recovery is going to be quite volatile and choppy.”

January’s numbers also point to a listless Chinese New Year start, with revenue growth falling below the low end of analyst estimates that ranged from 5 percent to 12 percent. The weeklong holiday celebration runs through Feb. 2 in China this year. In 2016, the Lunar New Year holiday fell in February.

Wynn Resorts Ltd. fell as much as 2.9 percent in New York, while Las Vegas Sands Corp. lost 1.7 percent. MGM Resorts International slipped 0.9 percent and Melco Crown Entertainment Ltd. tumbled 3.6 percent. Those losses followed Hong Kong declines for Sands China Ltd., Wynn Macau Ltd., Galaxy Entertainment Group Ltd. and SJM Holdings Ltd. The Bloomberg Intelligence index of Macau gaming shares also dropped, losing 1.9 percent compared with the 0.2 percent drop in the benchmark Hang Seng index.

Betting volume from high-stakes players may have been softer than expected during the first few days of the Chinese New Year holiday. “It is fair to say that some analysts and investors got too excited about the VIP segment, and the V-shape recovery in VIP demand is not coming through,” said Nomura Holdings Inc. analyst Richard Huang.

Revenue from the baccarat card games favored by the big bettors from China saw a 13 percent increase during the final three months of 2016, the first quarterly expansion since 2014. 

While Macau is reliant on the casual gamblers and holiday revelers that the new resorts are targeting, challenges include a cannibalization effect with the latest properties drawing in crowds at the expense of existing casinos.

Sands President Rob Goldstein said last week that its Parisian casino gained traffic and posted net revenue in its full quarter of operation, while denting patronage at its Sands Cotai Central property.

“Macau’s latest wave of new resorts poses the classic gambler’s risk-reward dilemma,” Bloomberg Intelligence analyst Brian Egger wrote in a note this week. “Additions are key to Macau revenue recovery and long-term growth, yet entail challenges.”

The industry also faces pressure on profitability as a hotel surplus leads to more cuts in room rates, he said.

Bet on Mass Gamblers

Tourists to Macau reached 614,000 in the first five days of the Chinese New Year holiday that began Jan. 27, an increase of 5.7 percent compared with a year ago. Tourists from mainland China, which accounted for about 68 percent of arrivals, also gained 6.6 percent in the period.

Macau’s bet on driving tourists and the more profitable mass gamblers to the enclave may still pay off in February, when a fuller picture of the Chinese New Year holiday revenue will emerge.

“The recovery during Chinese New Year and February can be sharper too,” JPMorgan Chase & Co. analyst DS Kim wrote in a note. “We believe the disappointing January was more a blip than a trend.”

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