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Macau casinos post year-over-year increase for June

Macau’s gambling revenue growth rebounded modestly last month from May, though at a slower place than expected, as Las Vegas casino companies invest heavily in the former Portuguese colony.

Gaming revenue in June grew by 12.2 percent, to $2.92 billion, according to data released Monday by Macau’s Gaming Inspection and Coordination Bureau. Analysts expected a 15 percent increase.

This followed 7.3 percent growth in May; the first time revenue grew at a single-digit pace since July 2009. For the six months of 2012, gaming revenues in Macau have increased 19.8 percent, to $18.6 billion.

Analysts said the figures were distorted by a typhoon that hurt visitation Friday and Saturday.

"But for the typhoon, we believe June results would have been in line with expectations," said Grant Govertsen, managing partner of Union Gaming Research Macau. "We believe the first two days of July have rebounded nicely from the last two days of June in terms of visitation and gaming volumes."

Three Las Vegas-based gaming companies, Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International, operate casinos in Macau. Las Vegas Sands’ Macau subsidiary Sands China recently opened the $4.4 billion Sands Cotai Central resorts.

"The continued ramp up of Sands Cotai Central and loosening on monetary policy in China should help drive demand going forward, but we don’t see a catalyst for accelerated growth near-term," Rachel Rothman, a Susquehanna Financial Group analyst, said in a research note.

Wynn Resorts casino-resort Cotai project in China’s special gambling district will cost $4 billion. With its latest multibillion-dollar project, Wynn is hoping to increase revenues from Macau.

More than 70 percent of Wynn Resorts’ $1.3 billion first-quarter profit came from its Wynn Macau subsidiary. Las Vegas Sands is also heavily invested in Macau, with four resorts, including three on Cotai.

MGM Resorts operates the MGM Grand Macau and is seeking approval for its Cotai hotel-casino project. Macau is the largest gambling center in the world, generating five times more gambling revenue last year than Las Vegas.

Shares of all three gaming companies closed lower Monday. Wynn Resorts lost $1.57, or 1.51 percent, to $102.15, while Las Vegas Sands dropped 52 cents, or 1.20 percent, to $42.97 and MGM was off 11 cents, or 0.99 percent, to $11.05.

Gambling revenue growth in Macau has been consistent since 2009, but analysts remain concerned about the sustainability of growth in VIP play as the Chinese economy slows.

Sterne Agee analyst David Bain wrote Monday that the gaming slowdown in the second half of June was also due to temporary issues, such as the European soccer tournament, which diverted gamblers from Macau. Gaming revenues dropped 11 percent from May to June. Rothman attributed the decline to June traditionally being one of the weakest months of the year.

"Looking ahead, we continue to get the sense that the market is in a transitional phase," said Steven Wieczynski, a gaming analysts with Stifel Nicolaus.

Wieczynski described the transition as "the higher-margin mass market segment, aided by continued investment in capital projects aimed to improve accessibility to guests residing (in China) and the introduction of more mass-oriented properties, appears poised to deliver outsized growth relative to the VIP segment as the Macau market continues to mature."

He wrote in a note that the introduction of more nongaming amenities and more varied hotel room prices "allows operators to attract a more diverse pool of guests to the market."

Contact reporter Chris Sieroty at csieroty@reviewjournal.com or 702-477-3893

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