Casino companies operating in Macau are in focus after gaming revenue in the region fell 8.5% in November. Analysts have recently suggested that there was at least a small impact on Macau gambling from anti-government protests in Hong Kong. Publicly traded companies in the Macau gaming space include Las Vegas Sands (LVS), MGM Resorts (MGM), Wynn Resorts (WYNN) and Melco Resorts (MLCO).
GAMING DATA: Macau's Gaming Inspection and Coordination Bureau said gross revenue from games of fortune in the region decreased 8.5% from a year earlier to 22.877B patacas last month. This compares to 3.2% decrease in October to 26.443B patacas and an 0.6% year-over-year increase in September to 22.079B patacas.
November's weak performance continues a trend of declines that had been briefly halted in September, suggesting casinos remain vulnerable to headwinds including the trade war between the U.S. and China.
WHAT'S NOTABLE: Macau casinos are heading for their first yearly decline since 2016 as multiple headwinds have foiled any potential prospects for a recovery. The industry is facing obstacles that include the trade war between the U.S. and Chima, a weakening yuan, escalating protests in Hong Kong and slow economic growth in China.
Macau has seen softening growth in gaming revenue since the second quarter, with VIP business being hit by weakening China property prices and turmoil in the stock market. A U.S.-China trade war and slowing Chinese economy are likely to weigh on sentiment in the VIP segment, according to reports. China and the U.S. are trying to negotiate a new trade deal, but there is still uncertainty and the countries have slapped tariffs on billions of dollars worth of their goods. High-rollers are also cautious after a series of moves to suppress phone and online gaming in the past month by the Chinese government. Additionally, anti-government protests in the Chinese-controlled Hong Kong have disrupted transport and deterred travel to Macau in recent months, and while analysts have said that the impact on gaming has been minimal, the turmoil has added to the softening sentiment.
ANALYST COMMENTARY: The second weakest figure of this year comes as some high roller players delay trips to Macau, according to analysts. Visa policies to Macau were tightened ahead of the 20th anniversary of its handover from Portugal and an expected visit from President Xi Jinping, Credit Suisse analyst Kenneth Fong told Bloomberg.
Nomura analyst Harry Curtis said Macau GGR was a "bit" better than expected in November and estimated GGR per day accelerated to around MOP846M in the final six days of the month from ~MOP742M month-to-date through November 24. The analyst thinks the official November number should be viewed as an incremental positive for the Macau gaming stocks.
Looking ahead, some analysts expect a mild improvement for Macau in 2020, with gaming revenue helped by easier comparisons and some pent-up demand.
PRICE ACTION: In morning trading, Las Vegas Sands was up 0.4%, while MGM was up 0.2%, Wynn Resorts rose 0.4% and Melco Resorts shares trading in New York were up about 2%.