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Gaming Guru

Howard Stutz

Macau gaming revenue tumbles for third straight month

2 September 2014

Macau gaming revenue took a nose dive for the third consecutive month in August, sending fears on Wall Street that the declines in the world’s largest gaming market could continue into 2015.

Despite the 6.1 drop in August — the largest decline in 2014 — the Macau gaming market is up 8.1 percent for the year’s first eight months following 2013’s record $45.2 billion in gaming revenue.

The last time Macau saw three straight monthly gaming revenue declines was five years ago. Macau suffered seven straight monthly revenue declines between December 2008 and June 2009.

Union Gaming Group principal Grant Govertsen, who is based in Macau, said “a confluence of factors” have driven down high-end wagering in Macau, which is the largest segment of the region’s gaming market.

Govertsen said the biggest issue has been an anti-corruption crackdown by the Chinese government.

On Monday, the Macau’s Gaming Inspection and Coordination Bureau said the market collected $3.6 billion from gamblers in August, a 6.1 percent decline compared to August 2013. The down month follows a 3.7 percent decline in June and a 3.6 percent drop in July.

J.P. Morgan gaming analyst Joe Greff said the VIP demand and junket liquidity “have been negatively impacted” by the anti-corruption crackdown.

“We continue to expect negative market-wide VIP performance while at the same time we are monitoring mass market growth trends, which, in August, much like July, decelerated more than our prior thinking,” Greff said.

Govertsen said he wouldn’t be surprised to see the declines continue into the second half of next year, about the time the second phase of the Galaxy Macau opens. The property is owned by Hong Kong-based Galaxy Entertainment.

“Based on continued conversations we have with industry insiders the consensus still seems to look for an early 2015 recovery,” Govertsen said. “The VIP segment remains weak.”

Govertsen added the market could see a jump in high-end play during October, which is a holiday period in China.

“This temporary blip, in our view, could potentially create a false expectation of recovery,” Govertsen said.

Analysts had expected the Macau market to dip in June because of attention the paid to the World Cup soccer games.

But any prolonged downturn in Macau concerns Wall Street because three Nevada-based casino operators — Las Vegas Sands Corp., Wynn Resorts Ltd. and MGM Resorts International — derive a significant amount of their annual revenue from the market, which is the only legal gaming region in China.

All three companies are in the process of building new multibillion-dollar hotel-casino developments on the region’s Cotai Strip: the $4 billion Wynn Paradise, the $2.9 billion MGM Cotai and the $2.7 billion Las Vegas Sands Parisian.

The developments are expected to open by 2016.

Macquarie Securities gaming analyst Chad Beynon called the August decline “a negative surprise,” which indicates that the major anti-corruption measures instituted by the Chinese government “could further affect VIP throughout the rest of 2014.”

Beynon lowered his stock price targets on Wynn, Las Vegas Sands and MGM Resorts.

The August gaming revenue totals were announced as Macau Chief Executive Fernando Chui Sai On was reelected to his second and final five-year term as Special Administrative Region’s top elected official.

Chui is expected to begin the process of negotiating gaming concession renewals, which start expiring in 2020.
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