Macau outlook ‘sound’ despite underwhelming growth

Macau’s gaming outlook remains “fundamentally sound” despite a slump in the share prices of several Hong Kong-listed casino operators after slower-than-anticipated monthly revenue growth, according to investment firm Jefferies.

A 12.5% increase in revenue from so-called “games of fortune” to $2.78bnin June was significantly lower than analysts’ expectations of about 18%. The share prices of Galaxy Entertainment, Melco International, Sands China and Wynn Macau all fell in the immediate aftermath of the disclosure.

However, Jefferies managing director David Katz cautioned against drawing long-term conclusions from results that had “significantly” missed consensus estimates.

“The opaque structure of Macau has resulted in wide disparities to intra-month checks the past two months and in the past, which can increase volatility,” he stated, according to Barron’s.

Katz estimated third-quarter gross gaming revenue of 10.7% and added that the second quarter had not “altered our views on the upcoming quarter or long-term capabilities as we believe business remains fundamentally sound”.

The figures represented a 23rd consecutive monthly increase in Macau’s gross gaming revenue. Accumulated GGR for the first half of this year is up by 18.9% at $18.6bn in comparison with the corresponding period last year.

However, Japan is likely to provide a further challenge to Macau in the long run.

Last month, law-makers in the country’s lower house passed an integrated resort implementation bill and extended the Diet’s session until July 22 in an effort to give the upper house a chance to sign off the legislation, which would open up the country to regulated casinos.