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Rebound in Macau boosts Las Vegas gaming companies

Updated May 1, 2017 - 11:15 pm

The rebound in Macau continues for Las Vegas’ largest casino corporations.

After companies posted strong first-quarter results last week, the latest data indicate they are off to a robust start in the second quarter.

Macau gross gaming revenue advanced 16.3 percent in April to 20,162 patacas ($2.52 billion), according to government data posted Sunday night. That beat Wall Street expectations of 14.5 percent.

The region’s gross revenues are up 13.8 percent over the first four months of 2017 to 83,640 patacas ($10.4 billion), missing a three-year high by less than 0.4 percent.

May is shaping up to be another strong month, according to analysts. Wells Fargo expects May revenue to advance as much as 18 percent, the bank said in a note today. Macau may see a 10 percent increase in mainland investors during the May holidays, according to the bank.

Wynn Resorts, Las Vegas Sands and MGM Resorts, which all reported solid earnings last week, generate 64 percent, 59 percent and 20 percent, respectively, of their revenue from Macau. MGM will open a second casino on Macau later this year, increasing its exposure to the Chinese gaming province.

Shares of the companies rallied today on the back of the Macau numbers. Wynn Resorts gained $3.38, or 2.75 percent, to $126.39. Las Vegas Sands added 1.1 percent while MGM gained 1.3 percent.

Macau may enjoy its best year since 2014 as China’s economic growth stabilizes and its property market rallies, giving confidence to the nation’s high rollers. Macau’s surging gaming growth this year has been mainly driven by VIP visitors, according to Wall Street analysts.

China posted first quarter economic growth of 6.9 percent, its best quarterly result in more than a year. The nation’s property market has been on a tear since last year, when prices rose the most since 2011. Macau VIP gaming revenue is tightly correlated with fixed investments such as property, according to Fitch Ratings.

Fitch earlier this month raised its full-year Macau gross gaming revenue forecast by a quarter to 12 percent from 9 percent. The firm cited stronger economic data and players’ greater familiarity with the state-led corruption crackdown as the main reasons.

The Chinese government launched a widespread fight again corruption in the middle of 2014, causing VIP players to cut trips to Macau. That triggered 26 months of gaming revenue declines. Macau monthly gaming revenue began to rebound late last year.

That rebound — and the possibility the Chinese government will try to rein in property prices — will make it harder to maintain the 16 percent to 18 percent growth seen over the past three months.

“The forecasted (12 percent) growth rate takes into account tougher year-over-year companions in the second-half of 2017 and the possibility that increased real estate restrictions may slow economic growth,’’ Fitch wrote in a note in mid-April.

The Review-Journal is owned by the family of Las Vegas Sands Corp. Chairman and CEO Sheldon Adelson.

Contact Todd Prince at tprince@reviewjournal.com or 702-383-0386. Follow @toddprincetv on Twitter.

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