SINGAPORE (Feb 11): Monthly casino revenue in Macau fell for the first time in more than two years as China’s economic slowdown deterred high rollers — but the drop was less steep than expected, fuelling a relief rally in gaming shares.
Gross gaming revenue in Macau fell 5% in January to 24.9 billion patacas ($4.2 billion) from a year earlier, according to data from the Gaming Inspection and Coordination Bureau. With the median analyst estimate calling for a 9% drop, the Bloomberg Intelligence index of Macau gaming stocks climbed after the news, with shares in Wynn Macau and Galaxy Entertainment Group rising 2% at the close on Feb 1 in Hong Kong.
The results may bolster optimism that recreational gamblers who plunk down smaller bets than high rollers are still trekking to the world’s largest gaming mecca even as China’s economic slowdown and trade tensions weigh on Chinese consumers. Overall, casino revenue in Macau is expected to decline this year as nervous Chinese gamblers stay away from the tables.
“The revenue drop in January reflects the continuous weakness of the business from high-stake gamblers who are holding on to their money more tightly amid China’s economic uncertainties such as the trade war,” says Bloomberg Intelligence analyst Margaret Huang.
January’s revenue decline, which was anticipated, snapped 29 straight months of growth. The timing of this year’s Lunar New Year did not help Macau’s monthly casino takings. The holiday typically comes with a few weeks of a marked slowdown prior to it. Those weeks of lag showed up in the January numbers, setting up a difficult comparison against a January 2018 revenue gain that was the strongest in four years.
Still, the less-than-expected drop in casino takings is reason enough for investors to cheer, says Grant Govertsen, a Union Gaming Securities Asia analyst.
“We are encouraged by the January results and view the market as being more robust than it gets credit for, especially given the timing of Chinese New Year this year,” Govertsen writes.
The Bloomberg Intelligence index of Macau casino shares closed with a 0.7% gain in Hong Kong on Feb 1, having reversed a decline at the opening.
Now all bets are on February. This month’s receipts, which will reflect the lunar holiday, are expected to grow 5%, according to a survey of analysts compiled by Bloomberg. Govertsen says mass market demand remains high.
Lawrence Ho, CEO of Melco Resorts & Entertainment, recently said the concerns about Macau were overblown. With the casino operator’s hotel rooms at its three properties all sold out, Ho said he expected a booming Lunar New Year holiday.
The market was also buoyed by Wynn Resorts’ estimate beat this week, after it reported that 4Q revenue and earnings were stronger than expected.
Still, Wynn’s top chief took a cautious tone.
“Chinese New Year is coming up, and that is going to be the real test for the first quarter,” says CEO Matthew Maddox on a conference call. “In Macau, it’s inherently volatile, and there are peaks and valleys.”
