International Moats: Game On
Financials, which struggled in the aftermath of Brexit, recovered to support the International Moat Index in November. The primary drivers of Index performance were gaming companies with operations in Macao and Singapore. The Index’s top five performers were all gaming companies, led by MGM China Holdings Ltd (2282 HK, +34.08%) and Genting Singapore PLC (GENS SP, +28.50%). By contrast, poor performance from Australian communications firm Vocus Communications (VOC AU, -29.09%) following management’s disappointing guidance notes was not enough to drag the Index into negative territory.
Global financials (IXG) (IPF) (PSP) recovered in November with the Commonwealth Bank of Australia, the National Bank of Canada, and the Industrial and Commercial Bank of China gaining 7.2%, 5.1%, and 2%, respectively. However, the real stars of the month were gaming companies in Macao like Galaxy Entertainment Group and MGM China Holdings. Gaming stocks extended gains in November after posting their strongest revenue growth in almost three years amid increased visitors.
According to Macao’s Gaming Inspection and Coordination Bureau, the gross revenue for gaming companies rose 14.4% to $2.4 billion in November—the highest YoY (year-over-year) growth since February 2014. This growth exceeded analysts’ expectations of an 11% rise. November saw the fourth consecutive month of gains.
Rise in number of visitors
With the gradual rise in visitors, the $30 billion gaming industry in China is showing signs of revival from a two-year slump with many operators opening new resorts. According to the Statistics and Census Bureau, the total number of visitors in Macao increased 0.2% to 25.5 million during the first ten months of 2016. October saw an increase of 1.6% YoY and 10.4% higher compared to the previous month. The rise in visitors is a big positive to the top line of gaming companies like MGM China Holdings.
Japan to legalize its gaming business
While the Macao gaming industry is showing signs of revival, Japan is all set to legalize casinos. Genting Singapore, which operates integrated casino-resort in Singapore, is likely to be the major beneficiary as it plans to enter the Japanese market.
Vocus Communications, the cloud services, data center, and home broadband business provider, edged lower in November after poor earnings guidance.