Macau continues to outperform, according to Sterne Agee analyst David Bain, which is positive for gaming companies that operate there including: Melco Crown Entertainment Limited (NASDAQ: MPEL), Las Vegas Sands (NYSE: LVS), MGM Resorts International (NYSE: MGM) and Wynn Resorts Ltd. (NASDAQ: WYNN).
"According to our checks, Macau table-only gross gaming revenue (“GGR”) is MOP17.6b through March 17," Bain said. "Including slots, the GGR run-rate for March is MOP33.3b or +~32% YoY. We are raising our March YoY estimate to +20% YoY (MOP30.0b) from +14%, and note our March estimate is ~6% higher than Macau’s all-time monthly record set in December of last year."
MPEL remains our top idea. Applying a peer multiple to the stock would suggest price over ~$28 per share.
Looks like a big month in the works! 6% higher then all time record with the 20% YOY estimate from Stern Agee and not 32% run rate!
Nice to see... but remember that there are 5, COMPLETE weekends contained in this month. That's a VERY favorable calendar. As of march 17th, there were 8 weekday days ( monday thru thursday) and 9 weekend days (friday thru sunday) thus far. I'd say that $3 billion pataca's worth of gaming revenues would be attributable to the "perfect", full-month calendar alone.
Similarly, February was about the WORST calendar month for a Lunar New Year month as you can have. The 2 weeks prior to LNY are typically almost the weakest of the year, and there were 9, February days ahead of LNY on the 10th. Further, LNY itself was on a Sunday, so the weekend was wasted with "arrivals" instead of people already checked in an planted at the gaming tables. Finally, once the LNY week was done, there were only 11 more Feb. days for VIPs to come in and make up for the days they spent avoiding the LNY week crowds...
... the LNY month couldn't have been laid out worse than that on the calendar.
Not to be trite, but a 30% gain in GGR is a 30% gain, even if there are 5 weekends and 3 more days in March. It's still an impressively big number. That big number will come after a big CNY that saw record crowds too. It would be natural for market sentiment to be looking for a slowdown to follow. A 30% increase instead, could be just the news needed to give pps a boost. The numbers would also show the merits of Sands marketing that appeals to all 3 segments of the gaming market place; mass, premium mass, and VIP. These numbers would also diminish the creditability of rumors that China's new gov will slow gaming in Macau.
The first 10 days of March were variously estimated at plus 16 to 28%. At that time, I expressed concern that the size of the increase, if transitory, i.e., if it resulted from displaced CNY VIP, LVS might suffer from unrealistic expectations as the most optimistic YOY estimate for 2013 stood at 16% at the beginning of the year.
That 16% YOY estimate looked aggressive and seemed somewhat challenged by our 9.4 cumulative year to date (through February) GGR increase results and the various concessionaire management's low single digit overall growth estimates before and after CNY.
Now we have a 32% increase over 17 days from Sterne Agee.
I'm sorry, but this is a paradigm shift, we're too distant from CNY to be experiencing a one time displaced VIP return and the rate in increasing. Something else is at play, maybe, trains, planes, ferrains (OK ferries) and more immigration lanes. All the infrastructural improvements are coming together and the incredible free press (Macau is the place to visit if you can get in) are taking GGR to an unexpected level.
If the last 14 days of March which contain two full weekends end with a 30% increase in GGR, our run rate will be above the most optimistic predictions and Macau is supposedly a 2nd half story! I've made no secret of the fact that my bet is on the 2nd quarter for LVS and wow, that's still the case, but it's at a whole nether level now.
Summertime and the living is easy, remember?
Sentiment: Strong Buy