Macau casino stocks slip after May revenue report

By Harrison Sayers

Macau's gross gaming revenue failed to reach analysts expectations in May leading to several casino operators experiencing a decline to their share values.

Macau's gambling commission, The Gaming Inspection and Coordination Bureau, showed in its latest monthly report for May that gross revenue from games of fortune only totalled $3.15 billion during the month. Despite the revenue being higher than the $2.82 billion it registered during the same period last year, it  more importantly came in well below analysts’ expectations for the month.

Casino operators share values decreased as a result of the 12.1% gain to the regions gambling revenue in May, an increase which failed to meet the industry analysts’ high expectations of a 16-20% growth rate. Comparatively, the year-on-year growth posted by the region in April had been 27.6%.

As a result of the underperformacnce, an index of the Macau casino operators experienced a 3% decline, with MGM China Holdings share value declining at an even faster rate, falling by 4.4%. Wynn Resorts were also unable to escape the decline, reporting a decrease of 3.3% to it's shares value on Tuesday.

One of the reasons reported to exacerbate the reduction in casino share value and the revenue decline is a result of increased reports surrounding a Chinese Government crackdown on cash outflow to and from the region.

The main issue and threat to investors is the fact that the potential cash flow clampdown, as has been the case in the past, might result in numerous cash machines being removed from within casinos and other venues, mainly pawn shops, in Cotai and the other nearby areas such as Gongbei.

Investors know that as these cash machines and pawn shops are frequented by gamblers as a source for funding their games, and that the lack of cash machines will have a negative impact on the city’s intake from mass market gambling.

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