Casino shares surge on stronger-than-expected revenue

Traffic drives past a half-sized replica of the Eiffel Tower stands at the construction site of Parisian Macao, operated by Sands China

Macau casino shares rose in Hong Kong trading after a brokerage said gaming revenue was stronger than expected this month.
MGM China Holdings Ltd. surged 6.9 percent to close at HKD11.42, the most intraday gain since July 9. Galaxy Entertainment Group Ltd. jumped 6.1 percent with Sands China Ltd., SJM Holdings Ltd. and Wynn Macau Ltd. rising more than 2 percent. The benchmark Hang Seng Index lost 0.6 percent.
The region’s gross gaming revenue was MOP9.1 billion (USD1.1 billion) during the first 11 days of October, a period that included China’s week-long National Day holiday, according to data from Credit Suisse Group AG. That works out to an average daily revenue of 827 million patacas in the month to date, higher than the brokerage’s estimate of 750 million to 800 million patacas, analysts led by Kenneth Fong wrote in a note Monday.
The local gaming operators are going through the worst downturn in their history as China’s anti-graft crackdown and slowing economic growth have kept high rollers at bay. The city’s gaming revenue has fallen for 16th straight months with September figures dropping to the lowest level since late 2010. Still, casino receipts so far in October may lead to a drop of 25 percent to 28 percent, Fong wrote, the smallest decline in nine months.
Melco Crown may have clinched the approval of 210 new gaming tables for its Studio City casino-resort, which is scheduled to open on Oct. 27, and another 40 by the end of the year, Fong wrote, citing Asia Gaming Brief. Galaxy could also get 50 new tables in the coming weeks and another 50 after that, according to the report.
“If correct, this would be a potential positive for Melco and Galaxy given the under-allocation of new tables is one of the biggest market concerns for new projects,” Fong said.
Casino revenue from mass-market gamblers, referring to lower-end players, has recovered 3 percent in the third quarter, compared with the previous three-month period, according to Karen Tang, an analyst at Deutsche Bank AG.
“Consensus seems too excited on quarter-on-quarter mass gross gaming revenue stabilization, and fails to consider longer-term mass margin impact from increasing competition” after the opening of Studio City, she wrote in a note Monday.
She expects Galaxy and Melco to report the strongest earnings growth in the upcoming third-quarter earnings season which will be kicked off by Galaxy this week. Stephanie Wong, Bloomberg