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Chinese government eases visitation rules as Macau gaming revenues decline

2 Jul 2015

By Howard Stutz
There was actually a glimmer of good news coming from Macau at the end of June.

But to find it, you need to look past the Chinese gaming market’s 13th straight monthly gaming revenue decline and the region’s lowest single monthly figure since November 2010.

The good news came in the form of a change in visitation rules and one reported uptick in gaming revenue toward the end of the month.

The Chinese government eased visitation rules, effective Wednesday, that essentially allows mainland residents to visit Macau twice a month rather than twice in 60 days. They can also stay in Macau for up to seven days, up from the previous limit of five days.

The proclamation gave a slight bump to the stock prices Tuesday of Las Vegas Sands Corp., Wynn Resorts Ltd., and MGM Resorts International, which operate casinos in Macau and are expanding their holdings through construction of multi-billion dollar resorts. The increases continued Wednesday.

Macau’s Gaming Inspection and Coordination Bureau said Wednesday the nearly three dozen casinos in the market collected $2.172 billion in gaming revenue in June, a 36 percent decline compared to a year ago.

June was Macau’s ninth straight double-digit decline. For the first six months of the year, Macau gaming revenue is down 37 percent.

“Although a 36 percent year-over-year decline is far from healthy, we find it encouraging the theme of modest sequential comparison improvement remains on trend,” Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski told investors Wednesday.

Nomura gaming analyst Harry Curtis said gaming revenue actually grew in Macau over the month’s last nine days. He said the decision by the Chinese government to increase visitation shows the leadership is concerned about the 13 straight months of declining revenue.

“As of yet, we have no clear reason for the month-end increase, but it could correlate with the beginning of the traditionally stronger summer tourist season,” Curtis said.

A government crackdown on corruption and the softening Chinese economy have slowed business in the Chinese gaming market since last year. Much of the corruption investigation have focused on junket operators that bring business to the high-end gaming parlors.

Last week, China’s Central Commission for Discipline Inspection announced a new round of corruption inspections, targeting 26 government bodies and state-owned companies. Also last week, Macau casino junket operator Cheung Chi-tai, accused of laundering almost $2 billion, was arrested by Hong Kong police.

Wells Fargo Securities gaming analyst Cameron McKnight said “the broad slowdown” in China's economy remains the troubling “headwind” to any sustained recovery in the Macau market.

New casinos — the $4 billion Wynn Palace, the $2.9 billion MGM Cotai and the Las Vegas Sands’ $2.7 billion The Parisian Macao — are expected to open in 2016.

“Once Macau revenues do improve, we do not expect a sharp 'V-shaped' recovery like in 2009 and 2013, given stricter policy settings and lack of broad-based economic stimulus in China,” McKnight said.

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