Gaming | Analysis: Growth returns but not without hurdles

Macau casinos returned to growth in May, yet the modest revenue gain is a sign that the city still faces headwinds from regional competition and trade war uncertainties.

Gross gaming revenue in May grew 1.8% from a year earlier to reach MOP25.95 billion, according to data provided by the Gaming Inspection and Coordination Bureau.

Coming in lower than the median analyst estimate of 3% increase, the marginal growth interrupted two consecutive months of decline, but was still not enough to offset the contraction in year-to-date revenue.

Between January and May, Macau recorded gross gaming revenue of MOP125.69 billion, or 1.6% less than the equivalent period in 2018.

The contraction comes despite a record number of visitors to Macau this year, which is currently tracking more than 20 percent higher than in 2018.

However, at almost MOP26 billion, the month of May has proven to be the biggest earner of the year-to-date, narrowly ahead of March’s MOP25.84 billion. Its closeness to the monthly average of MOP25.13 billion is a sign of market stabilization.

The outlook is mixed for June. June has been a consistent poor performer in recent years, recording the second-lowest monthly take in both 2018 and 2017, and the lowest in 2016.

But, given the low comparison base, a take of just MOP24.5 billion in June would translate into enough year-on-year growth to round out the first half of the year net zero over 2018.

A slowing Chinese economy and trade war have loomed over Macau this year, ending more than two years of uninterrupted revenue growth as the high-roller segment has weakened.

The stagnant results reinforce another trend that is worrying analysts: many high rollers are being lured away by attractive rival gaming spots.

According to Bloomberg, as the trade war with the U.S. drags on, analysts are not optimistic for the rest of the year. While the mass-market segment has shown some strength, analysts still forecast an overall drop in revenue for the full year, citing geopolitical uncertainty.

Meanwhile, Macau casino stocks have been dropping amid the more pessimistic outlook. The Bloomberg Intelligence index of Macau casino stocks slid 20% in May, for the biggest monthly decline since September 2015. The worst performer was Wynn Macau Ltd., off 26%. For the year, the industry gauge is up 3.2%. DB/Bloomberg

Melco acquires 20% in Crown Resorts

Lawrence Ho’s Melco Resorts and Entertainment will pay about 1.76 billion Australian dollars (about 9.87 billion patacas) to acquire a 19.99% stake in Australia-based casino operator Crown Resorts. Melco will purchase the 135.35 million shares in the company from CPH Crown Holdings Pty Ltd., controlled by James Packer.

Following approval from Australian authorities, Melco Resorts said it will pursue board representation on Crown Resorts’ board of directors. Packer resigned from the company’s board last year, citing personal reasons.

Several analysts have suggested that the nearly 20% acquisition puts Melco in a strong position in the race for a casino license in Japan.

Ho and Packer were formerly partners under a joint venture known as Melco Crown Entertainment, which came to an end in 2016 when the Australian businessman started his retreat from Macau. The two business associates are known to remain friends.