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Gaming Guru

Howard Stutz

Macau gaming stocks fall after reports of visa, Chinese credit card restrictions

27 June 2012

Worries that China will limit the number of times citizens from the mainland can visit Macau, coupled with new government restrictions on credit card spending, caused gaming stocks to nosedive on the Hong Kong Stock Exchange Tuesday.

Macau-based subsidiaries of Las Vegas Sands Corp. and Wynn Resorts Holdings, LLC declined sharply in value on the Hong Kong Stock Exchange.

Wall Street tried, with some success, to defuse speculation before American markets opened. Las Vegas Sands, Wynn Resorts and MGM Resorts International - all of which have Macau subsidiaries listed on the Hong Kong Stock Exchange - ended trading in New York Tuesday with relatively little change from Monday's closing prices.

"We don't think there was a great deal of logic behind the stocks' decline yesterday," Nomura Securities gaming analyst Harry Curtis told U.S. investors.

On the New York Stock Exchange, Las Vegas Sands rose 9 cents, or 0.21 percent, to close at $42.99, MGM Resorts was also up 9 cents, or 0.86 percent, to close at $10.58. Wynn fell 2 cents, or 0.02 percent, to close at $102.04 on the Nasdaq Global Select Market.

"If there is any impact, it is likely to be temporary rather than have a deep impact on the sector's longer term fundamentals," JP Morgan gaming analyst Joe Greff told investors.

Media in Macau and Hong Kong this week reported that the Guangdong provincial government might limit its residents to three visas to visit Macau per year, down from four. Macau is the only legal gaming area in China.

China has at various times restricted travel to Macau, a former Portuguese colony now operated separately from Beijing as a special administrative region.

In 2008, China put visa restrictions in place, citing concerns of a rapid increase in the Macau gaming market. The restrictions immediately led to a slowdown in gaming revenues. Macau casinos saw just a 10 percent growth in revenues that year, down from 28 percent the year before.

It was also reported that China UnionPay, China's bankcard system, lowered its daily foreign transaction limit by a undisclosed figure. That would limit the amount customers can charge while overseas or in Macau.

Macau is the world's largest gaming market, producing more than $33.5 billion in gaming revenues in 2011, more than five times the gaming revenues produced last year on the Strip.

In May, Macau gaming revenues of $3.26 billion - the second-largest single-month revenue total ever recorded - was considered a disappointment. Gaming revenues grew 7.3 percent compared with May 2011. It was the first time since July 2009 that the gaming revenue increase failed to hit a double-digit percentage.

Based on news of the visa restrictions and credit card limits, analysts warned investors that Macau's gaming revenue growth in June could again fall short of a double-digit percentage increase.

Deutsche Bank gaming analyst Andrew Zarnett said visa restrictions would likely slow the volume of mass market visitation into Macau, rather than high-end customers who travel primarily on business visas.

"Although there is no official statement pertaining to changes, the visa restriction may be put in place temporarily to slow down the frequency of visitations from mainland China," Zarnett told investors. "If this policy is enforced through the second half of 2012, we view this event as a negative for the mass market, which comprises approximately 40 percent of the Macau gaming market."

Union Gaming Group principal Grant Govertsen, who is based in Macau, said it is often impossible to separate fact from speculation in the Chinese media. Shares of gaming companies listed on both U.S. and Hong Kong markets are sensitive to "unverifiable" headlines.

"When taken in the context of the decline in visitation in May, it might appear that there could be some substance to the speculation," Govertsen said. "However, we believe that operators are generally experiencing year-over-year increases in visitor volumes in June, while gross gaming revenue growth is trending up nicely."
Macau gaming stocks fall after reports of visa, Chinese credit card restrictions is republished from