Casino companies operating in Macau are higher in morning trading despite casino revenue in the Chinese territory that declined in April by the biggest year-over-year drop since June 2016. 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 declined 8.3% year-over-year in April to 23.59B patacas. This compares to an 0.4% decline in March vs. last year to 25.84B patacas and a 4.4% gain in February to 25.37B patacas. February's results were helped by the Chinese New Year holiday period. April's results are not only the weakest monthly revenue this year, but the biggest year-over-year decline since June 2016.
WHAT'S NOTABLE: 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.
As the special administrative region marks 20 years since its handover from Portuguese rule, slower mainland economic growth, a weaker yuan and a trade war are threatening to derail its growth. However, several of Macau's five-star casino resorts have seen strong advance hotel bookings for the upcoming Labour Day holiday from May 1 through May 4, according to information GGRAsia collected from the respective official booking websites of major properties.
MGM China said earlier this week that it was expecting “very strong” demand for its MGM Cotai casino resort during the upcoming holiday break, according to the publication.
ANALYST COMMENTARY: Earlier this week, HSBC analyst Charlene Liu downgraded Las Vegas Sands to Hold, saying she continues to prefer direct exposure to Macau through Las Vegas Sands' Hong Kong-listed subsidiary Sands China (SCHYY). She prefers Macau over Singapore for its "bigger market size and high growth potential."
On Wednesday, Bernstein analyst Vitaly Umansky said April's GGR was in line with expectations, and noted that following a weaker first half of the month, GGR picked up during the last week. During April, the analyst estimated VIP decreased in the 20% range y/y and Mass increased low single digit percentage range, with VIP constituting around 40% of GGR. VIP GGR may have been the lowest since early 2017, he said, adding that it is possible April has been the low point of the growth deceleration in Macau.
CLSA said April's GGR decline of 8.3% was "bad, but not as bad as feared," adding that it believes comps for May and beyond will get easier.
PRICE ACTION: In morning trading, Las Vegas Sands was up 1.5%, while MGM gained about 1%, Wynn Resorts jumped nearly 3% and Melco Resorts shares trading in New York were up about 2%.
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