Weekly Casino Notes: Stock Prices Correct After Third Consecutive Monthly Decline In Macau Gaming Revenues

The past week saw a correction in stock price for the casino companies after the gaming data was released by the Macau government. Macau casino revenues declined 6% for the month of August, third consecutive monthly decline for Macau gaming. ^[1] Casino stocks reacted to this data and Las Vegas Sands (NYSE:LVS) witnessed a decline of 5.56% for the week. Wynn Resorts (NASDAQ:WYNN) also declined by 3.74%, while MGM Resorts (NYSE:MGM) was down by 1.23% for the week.

The first gaming drop was in June this year when the gross revenues declined by 3.7%. ^[1] This was the first monthly decline in the past five years. The initial decline can be attributed to the FIFA World Cup as the high rollers from Macau shifted their focus on sports betting. However, July again witnessed a drop of 3.6% while decline in August was much higher at 6%. ^[1]

The lower gaming revenue was a result of Chinese government’s anti-corruption crackdown. A wave of high-profile arrests of senior Chinese officials is hurting the VIP business of Macau casinos. Moreover, the government imposed visa transit restrictions, which has shortened the duration of visitors’ stay in Macau to five days, and imposed greater penalties for non-compliance.

While it is difficult to assess how long VIPs will stay away from Macau, Nomura in one of its notes stated that MGM China and Sands China do not expect a rebound in VIP gaming for rest of the year. ^[2] Our current price estimate for Las Vegas Sands is $78, representing a premium of over 20% to the current market price.

See More at Trefis | View Interactive Institutional Research (Powered by Trefis)

1. Monthly Gross Revenue from Games of Fortune, Gaming Inspection And Coordination Bureau Macau, As of Sep 2014 [↩] [↩] [↩]
2. No lift in Macau VIP this year say MGM, Sands: Nomura, GGR Asia, Sep 4, 2014 [↩]