Analysts quickly wrote off Macau’s lower-than-anticipated results from May and turned their attention to another concern – soccer’s 2018 FIFA World Cup in Russia.
The international soccer tournament played every four years kicks-off on June 14. In the past, gamblers attention in Macau turned away from the baccarat tables to World Cup wagering.
“The tournament has historically accelerated the rate of month-to-month decline in Macau’s market-wide gross gaming revenue,” said Steven Wieczynski of Stifel Nicolaus Capital Markets. “We would not be surprised to see investors use the May comparison as a reason to take a breath and lock in profits ahead of what could be a tricky June period impacted by the forthcoming (World Cup).”
Macau’s Gaming Inspection and Coordination Bureau said Friday casino revenue grew 12 percent to $3.16 billion, well shy of analyst projections of a 20 percent increase. Still, May was Macau’s 22nd month of consecutive revenue hikes, a turnaround after the market hit five-year lows beginning in 2014.
Jefferies gaming analyst David Katz said lower hold percentages in high-end play, possibly due to the shift of the Dragon Boat Festival from May last year to June this year, may have played a hand in the diminished results.
Market reaction to Macau’s numbers was mixed Friday for the three Nevada-based casino operators with large Macau holdings. MGM Resorts International closed at $31.79, up 34 cents or 1.08 percent on the New York Stock Exchange, Las Vegas Sands was down 14 cents or 0.17 percent to close at $80.47 on the New York Stock Exchange, and Wynn Resorts fell $3.51 or 1.79 percent to close at $92.50 on the Nasdaq National Market.
Katz said the opening of the Hong Kong-Zhuhai-Macau bridge, a 34-mile, $16 billion project under construction since 2009 that will connect the three major Pearl River Delta cities by vehicle traffic, plus the opening of the Morpheus Hotel in City of Dreams, could help off-set any lost World Cup business.
“We maintain a positive view on the underlying fundamental businesses and adjust our expectations for tough comparisons throughout the summer months,” Katz said.
Previous World Cups have not been good for Macau gaming business, analysts said.
Percentage drop-offs in gaming revenue during the months of June and July while World Cup games were being played have historically been from the low-to-mid-teens.
Deutsche Bank gaming analyst Carlo Santarelli said the concerns about a World Cup slowdown were expected “to amplify.” However, he said the declines in June 2014 were more about the entire market “going negative” for the first time since 2009.
Macau gaming results suffered for several years while the Chinese government cracked down on corruption by junket operators who are tasked with bringing high-end play to the Special Administrative Region’s casinos.
“We see limited historical evidence to support a material impact from the World Cup or Euro Cup (soccer) events,” Santarelli said.
Meanwhile, Union Gaming Group analyst Grant Govertsen, who is based in Macau, said the mid-May action taken by mainland Chinese police against currency exchange shops at the Gongbei border could have played a part in decline of mass market customers. Most of the shops are still closed. The currency exchange locations convert Chinese money into Hong Kong dollars that are used to gamble in Macau casinos.
“We believe this would primarily just impact the lower tiers of (the mass market) and, importantly, would view the setback as temporary as workarounds typically pop up within a few weeks,” Govertsen said.
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgamingreports.com. Follow @howardstutz on Twitter.
