VIPs Keep Macau's Casino Revenue Recovering

Updated on
  • Gaming receipts jump 29 percent for 12th straight monthly rise
  • High rollers drive rebound in July despite China regulations

Macau Casino Stocks Fall on Revenue Miss

A rebound in Macau’s casino revenue accelerated in July as spending by high-rollers added momentum to a year-long recovery despite China’s efforts to curb capital outflows.

Gross gaming receipts rose for a 12th straight month, increasing 29 percent to 23 billion patacas ($2.9 billion), according to data released by Macau’s Gaming Inspection and Coordination Bureau on Tuesday. That topped the median estimate for a 26 percent increase in a Bloomberg survey of nine analysts, and is the biggest gain since February 2014.

Revenue in the world’s largest gaming hub has been steadily recovering after China’s corruption crackdown and slowing economy hit the market for more than two years. While an improving economy and the opening of new facilities have helped bring players back to Macau, the outlook still bodes uncertainties as Chinese authorities introduce efforts to halt hundreds of billions of dollars worth of outflows, some of which exit the mainland via gambling operations.

“Risk of heightening enforcement and potential policy pressures we had flagged have certainly not gone away,” said Daiwa Capital Markets Hong Kong Ltd. analyst Jamie Soo in a note Tuesday. “Some of the pressure on the gaming revenue does take time to manifest itself, and the seasonal impact of stronger mass numbers for summer months may very well smooth out the potential negative impact of this in the near term. ”

Still, the third quarter looks to be off to a strong start, and the market will likely react favorably to the numbers, Soo added.

Wynn Macau Ltd. shares rose 0.2 percent in Hong Kong, paring an earlier rally of as much as 1.2 percent. MGM China Holdings Ltd., which was raised to a buy at Morningstar, climbed 1.3 percent.

Bloomberg Intelligence’s index of Macau gaming stocks has rallied 20 percent this year. Wynn Macau is up 38 percent in 2017, while Galaxy Entertainment Group Ltd. has jumped 41 percent.

Revenue from high rollers, which was hurt the most amid the downturn, has shown a faster pace of recovery this year. It grew 35 percent in the second quarter, better than the 8.1 percent in the market for recreational gamblers, according to the city’s gaming regulator.

“VIP segment, for now, continues to see broad recovery across big and smaller junkets, a trend admittedly well above what we had envisioned,” JPMorgan Chase & Co. analyst DS Kim said in a note before the revenue data release.

The recovery is still susceptible to any renewed anti-corruption crackdowns from the mainland, especially as China gears up for the 2017 party congress this fall. Investor concerns remain amid reports of mainland police investigating questionable money transfers and freezing accounts of junket operators who ferry in wealthy players to gamble large sums on credit. Macau regulators are also requiring facial recognition and identification card checks at ATMs to curtail the overseas shifting of currency.

(Updates stock prices beginning in sixth paragraph.)
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