Analysis | Gaming stocks edge higher after March results

Gaming stocks edged higher at the start of this week after last month’s 18.1 percent year-on-year rise in Macau’s gross gaming revenue (GGR) was released in official gaming statistics. The rise was higher than analysts had forecasted – an average predicted increase was 12 percent year-on-year.

Despite the year-on-year rise, gaming revenues in March were down to about MOP21.2 billion from MOP23 billion in February, with the dip possibly the result of the Chinese New Year period, which was split across the first two months this year.

Should revenues hold stable in April over March, the year-on-year rise in GGR will stand at over 22 percent. This is due to the fact that revenues were declining in the first half of last year while they are increasing this year, thus the year-on-year difference continues to widen each month.

In January 2017, GGR grew 3.1 percent year-on-year, while it increased by 17.8 percent in February.

Nevertheless, analysts at Wells Fargo predict that the year-on-year GGR growth in April will be between 10 to 15 percent, higher than expectations from some other analysts.

“The yr/yr [year-on-year] growth was driven by an easy comp[arison] with last year March being down 16 percent yr/yr,” wrote Wells Fargo analyst Cameron McKnight in a note. “For the 1Q, gaming revenues are up 13 percent yr/yr. March was down 4 percent versus Jan/Feb, which is in line with the 3-year average.”

McKnight remained neutral in his opinion of gaming stocks, holding that the rise in gaming revenue may be driven by a delicate resurgence in the VIP segment.

“Our contacts maintain that VIP continues to outpace mass revenues. In our view, the VIP strength has been partly led by a Chinese real estate bubble,” he wrote. “We expect the increased government restrictions on real estate to at some point cool the market.” DB