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Macao Casinos Indicator Analysis: Revenue Sustainability in Question

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Part 2
Macao Casinos Indicator Analysis: Revenue Sustainability in Question PART 2 OF 11

Macao July Revenues Saw Highest Growth in 2017, Beat Expectations

May revenues mark high point

According to the Gaming Inspection and Coordination Bureau, Macao’s gross gaming revenues have risen 29.2% YoY (year-over-year) to MOP1 23.0 billion ($2.9 billion). July marks the 12th consecutive month of revenue growth for the gaming market and the sixth consecutive month of double-digit revenue growth. It’s also the highest growth recorded so far in 2017.

Macao July Revenues Saw Highest Growth in 2017, Beat Expectations

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The revenue growth beat analysts’ consensus by a wide margin. Analysts had forecast Macao July revenues to rise 26.0% YoY. The Chinese government’s crackdown on corruption in 2014 led to a secular fall in revenues for two years.

YTD (year-to-date) as of July 2017, revenues have risen 18.9% to MOP 149.3 billion ($18.6 billion).

Is it sustainable?

July’s revenue growth was also driven by the VIP2 segment. Analysts are thus cautious about the sustainability of this growth and have acknowledged the difficulty in predicting monthly revenues with the current volatility. Chinese authorities’ prevention policies on capital outflow are increasing the volatility of the industry. Some of the measures include the restriction on ATM3 withdrawals and increased scrutiny, including new technologies such as face recognition.

Typhoon Hato and tropical storm Pakhar

Analysts were initially estimating that Macao casinos would record a revenue growth of 22.0%–25.0% YoY. However, Typhoon Hato, which struck Macao last week, could lead to nearly a 600 basis point loss in revenue growth. The situation was worsened by tropical storm Pakhar that hit Macau on Sunday, August 27, 2017.

Macao’s tourism ministry has asked tourists to reconsider their trips to Macao. Also, the China National Tourism Administration has suspended outbound package tours from Mainland China to Macau until August 30. Visitors from Mainland China are the largest revenue group for Macao.

Investors can gain exposure to casino stocks by investing in the iShares US Consumer Services (IYC), which invests 1.6% of its portfolio in casinos, including 0.71% in Las Vegas Sands (LVS), 0.50% in MGM Resorts (MGM), and 0.35% in Wynn Resorts (WYNN). It has no holdings in Melco Crown Entertainment (MPEL).

  1. Macau Pataca
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  3. automated teller machine
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