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Macau suffers fourth straight monthly gaming revenue drop

7 Oct 2014

By Howard Stutz
A combination of market-stifling issues sent Macau’s casino industry to an 11.7 percent gaming revenue decrease in September, the region’s largest single-month decline in more than five years.

Analysts warned Monday that the Chinese gaming enclave, which has experienced four straight monthly revenue dips, hasn’t bottomed out.

Macau’s Gaming Inspection and Coordination Bureau said casinos collected $3.2 billion from gamblers during September. The figure was the largest single-month percentage drop since June 2009, and the dollar figure was Macau’s lowest single-month revenue total since November 2012.

The news, however, didn’t seem to faze investors. The stock prices of Las Vegas Sands Corp., Wynn Resorts, Limited and MGM Resorts International — the Nevada-based companies with growing Macau casino operations — all rose in trading Monday.

“The Street was expecting a midteens drop and this should be positive for Macau gaming stocks,” Macquarie Securities gaming analyst Chad Beynon told investors.

For the first nine months of the year, Macau gaming revenue is up 5.9 percent over 2013’s record $45.2 billion.

Union Gaming Group Managing Director Grant Govertsen, who is based in Macau, said the market has seen everything but “the kitchen sink” thrown at in the past few months.

In June, Macau casino revenue declined because gamblers were more focused on World Cup soccer. Meanwhile, the mainland Chinese government cracked down on corruption, which softened spending by high-end customers associated with junket operators.

The government also instituted visa restrictions earlier this summer that limited the number of trips a resident of mainland China could take to Macau. Also, the government halted the use of a debit card many Chinese used to transfer money from China for use in Macau.

Govertsen said pro-democracy demonstrations in Hong Kong have caused mainland Chinese to cancel trips to Macau.

“The protests in Hong Kong are having a negative spillover effect on Macau,” Govertsen said. “Many Hong Kong people have simply decided not to fight the protest crowds in Central to get to the ferry terminal.”

Govertsen said the start of the Chinese holiday of Golden Week could be hurt by the demonstrations, which are keeping mainland Chinese citizens from visiting Hong Kong as well.

“As we walked casino floors this weekend, they felt light relative to what would normally be expected on a holiday weekend,” Govertsen said.

Macau also implemented a smoking ban inside casinos Monday, which exempted the high-end VIP rooms. Analysts said they were watching to see whether the ban has additional effects on gaming revenue.

In a keynote talk at the Global Gaming Expo (G2E) 2014 in Las Vegas last week, Las Vegas Sands Chairman Sheldon Adelson said he thought the high-end gaming business in Macau would recover in two months once the government’s crackdown on corruption subsides.

“Everything is cyclical,” Adelson said of Macau. “It’s like gambling. Sometimes you’re up, sometimes you’re down.”

Las Vegas Sands operates The Venetian Macau Resort-Hotel, Sands Macau, Four Seasons Macau and the large Sands Cotai Central.

The Macau holdings accounts for 65.7 percent of the company’s overall quarterly revenue.

He said Chinese high-end players were “staying below the radar” because “they don’t want to send the message they may be corrupt.”

Las Vegas Sands is building the $2.7 billion Parisian development on Macau’s Cotai Strip. Wynn Resorts is building the $4 billion Wynn Palace on Cotai, while MGM Resorts is building the $2.9 billion MGM Cotai.

All three projects are expected to open in 2016.

Shares of Wynn closed at $183.79, up $1.51, or 0.83 percent on Nasdaq. MGM Resorts’ stock price increased 5 cents, or 0.23 percent, to close at $22.18 on the New York Stock Exchange. Las Vegas Sands, which is also traded on the New York Stock Exchange, closed at $62.92, up 43 cents, or 0.69 percent.

J.P. Morgan gaming analyst Joe Greff said September’s results in Macau were “slightly less bad than investors’ most recent expectations, though this decline still represented an accelerating decline from recent months.”

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