Macau’s casinos posted another US billion month in May, but it was less than analysts expected, and the stocks of most of the six Hong Kong-listed operators took a hit.
Gaming revenue rose 9.3 percent year on year to 32.4 billion patacas ($4.1 billion), according to the Gaming Inspection and Coordination Bureau. The growth was lower than the median estimate of 14.5 percent from seven analysts surveyed by Bloomberg News and did little to comfort investors spooked by a recent stream of bad news headlines.
“It’s a little disappointing,” Aaron Fischer, head of consumer research at CLSA, said of the May numbers. “It indicated there was a sharp drop at the end of month.”
The results initially drove Galaxy Entertainment’s shares down 3.1 percent, their biggest drop in weeks. SJM Holdings slumped 3.2 percent. Sands China fell 1.4 percent. Wynn Macau declined 1.2 percent.
Yet, revenue is up 15.8 percent year to date, and that’s in line both with consensus and operator expectations, noted Grant Govertsen of Union Gaming Research Macau.
“We believe that the VIP segment is likely tracking below expectations, with any deceleration in growth attributable to a confluence of factors,” he wrote in a client report. “That said, mass market appears to remain very strong, which is why we believe all management teams took the time to highlight during 1Q14 results that 70 percent-plus of cash flows come from non-VIP, suggesting that there is less risk to the Macau cash flow story this year than headline GGR numbers would suggest.”
VIP could be feeling the effects of less risk-taking due to ongoing consolidation in the junket sector and concerns about Xi Jinping’s anti-corruption drive, he said, with slowing economic growth and credit contraction in China also playing a part.
In Macau, casino operators also face land and labor constraints, and government limits on gambling tables have slowed capacity growth. Growth may also be slowing as a result of concerns about crackdowns spurred by Beijing on illegal debit card transactions and transit-visa abuses by mainland gamblers. The local government’s recent announcement that smoking will be banned in the casinos come October added to the bad news.
Govertsen, however, said he still expects 14 percent growth this year in total gaming revenue. Fischer also said he expects revenue to grow “at the mid-teens level,” likewise citing support from the booming mass-gaming segment.
