Gaming | Macau revenue gains for third month on tourism boost

Macau’s gaming revenue grew for a third straight month in October as China’s Golden Week holidays brought in more visitors to the city’s new family-friendly projects.
Gross gaming revenue rose 8.8 percent to 21.8 billion patacas (USD2.73 billion), according to Macau’s Gaming Inspection and Coordination Bureau. That compares with the median estimate for a 5.5 percent advance in a Bloomberg survey of seven analysts.
The results from October appear to show the sector growing strongly, following 7.4 percent and 1.1 percent year-on-year gains in September and August respectively.
The growth girds momentum in reversing a 26-month slump as the world’s biggest casino hub transforms itself into a tourist destination.
Macau, the only place in China where casinos are legal, has opened new billion-dollar resorts that target recreational gamblers instead of the high rollers that form the bulk of its gambling customers. Almost a million Chinese tourists visited the former Portuguese enclave in the first seven days of October for Golden Week, the most in at least a decade.
“The strong beat of the monthly gaming revenue is very likely due to the decent performance of both the mass market and the VIP business, and it will improve market sentiment,” said Richard Huang, a gaming analyst from Nomura International. The new casinos will continue to boost the market for the rest of the year, he said.
Macau casino shares extended gains after the data was released. MGM China Holdings Ltd. advanced as much as five percent while Sands China Ltd. gained as much as 4.3 percent. The Bloomberg Intelligence Macau Gaming Index gained as much as 2.4 percent. The benchmark Hang Seng index rose 1.2 percent at 3:38 p.m.
The better-than-expected results show Macau is at a turning point, wrote Union Gaming analyst Grant Govertsen in a note yesterday. He forecasts the city’s gaming revenue will grow 11 percent in November.
If Govertsen is correct, next month will mark the strongest year-on-year growth since March 2014, about three months before the gaming downturn began.
With the addition of the October results, Macau’s gross gaming revenue for the first 10 months of 2016 now stands just 5.8 percent lower than in the same period last year.
Angela Han, an analyst with China Merchant Securities, told the South China Morning Post that they “think Macau’s fundamental will continue improving and […] the city’s estimated gross gaming revenue next year to record two percent year-on-year growth after a four percent estimated decline for 2016.”
The gains also suggest the impact of last month’s detention of 18 Crown Resorts Ltd employees in China is “non-existent” for Macau casinos, wrote Govertsen. Chinese authorities detained the Crown employees for gambling-related crimes following warnings to the Australia casino operator last year to halt efforts to attract high rollers from the mainland to gamble overseas.
After the detentions, the head of the Macau gaming regulator Paulo Chan said the arrests won’t affect Macau’s casinos after he met with the city’s six casino operators.
Operators based in Macau have not been investigated so far as they have “closer communication ties” with Chinese government officials and a better understanding of how to conduct business in mainland China, said Sudhir Kalé, founder of GamePlan Consultants, which has worked with Crown and other large casinos.
“As non-Macau companies shy away from VIP activities in China, albeit perhaps temporarily, this should generally accrue to Macau’s benefit,” Govertsen wrote. MDT/Bloomberg