Macau revenues hit $4 billion in May but disappoint some investors

Only in Macau would a $4 billion gaming revenue month be considered a disappointment.

Analysts spent Tuesday explaining to skittish investors that the Chinese gaming market — the world’s most lucrative gambling destination — wasn’t heading downward.

“Final May results will likely be taken as negative given current investor skepticism, and focus, on Macau’s short-term results,” Sterne Agee gaming analyst David Bain said.

Macau’s Gaming Inspection and Coordination Bureau reported the market’s more than three dozen casinos collected $4 billion during May in China’s only legal gaming market. The figure was a 9.3 percent increase over May 2013.

The month marked the third time this year that Macau casinos reported $4 billion or more in gaming revenue.

Through May, gaming revenue is up 15.8 percent above 2013’s record-setting year of $45.2 billion.

But the single-digit percentage increase disappointed the investment community.

Stifel Nicolaus Capital Markets gaming analyst Steven Wieczynski said he expected the stock prices of Wynn Resorts Ltd., Las Vegas Sands Corp. and MGM Resorts International could feel some pressure.

All three companies are building multibillion-dollar resorts on the Cotai Strip.

MGM shares declined 75 cents or 2.87 percent to close at $25.38 and Las Vegas Sands was down $1.99 or 2.57 percent to close at $75.44. Both stocks are traded on the New York Stock Exchange. Shares of Wynn fell $9.79 or 4.49 percent to close at $208.23 on Nasdaq.

Wieczynski remained bullish on the companies, however, encouraging investors to look at the shares.

“All told, we continue to find the shares of Macau operators attractive at current levels, as we believe the recent market growth concern and media headline-driven pullback has created compelling entry points into above-average long-term growth stories,” Wieczynski said.

Analysts offered different reasons for the Macau results.

J.P. Morgan gaming analyst Joe Greff said political factors in China, including the effects from an anti-corruption campaign in mainland China, could be a factor in the results. The top tier of the high-end market, however, still seemed strong.

“This is the second month in a row of below expectation/mediocre marketwide growth,” Greff said.

Greff thought May was hurt by soft results from different segments of the high-end customer base, some of which was associated with business brought in by junket representatives.

Union Gaming Group principal Grant Govertsen, who is based in Macau, said the region’s mass market business remained strong and investors shouldn’t change the sentiment toward the casinos in the near term.

“The (high-end) segment is likely tracking below expectations, with any deceleration in growth attributable to a confluence of factors,” Govertsen said.

The analyst cited less risk-taking by junket operators, concerns over the anti-corruption crackdowns occurring throughout China and some effect from China macro-economic issues.

Bain said factors, such as travel postponements by parents ahead of next week’s China college entrance exam and weather, may have kept gamblers out of the casinos.

Contact reporter Howard Stutz at hstutz@reviewjournal.com or 702-477-3871. Follow @howardstutz on Twitter.