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Macau Gambling Revenues Dip in March: What's Next for Industry?

Zacks Equity Research

Macau, the world’s largest gambling hub, witnessed a decline in Gross Gaming Revenue (GGR) in March. Notably, this was the second decline in the last three months. Gambling revenues from the region declined 0.4% in the month.

In March, gambling revenues from Macau decreased to 25.84 billion patacas ($3.2 billion) from 25.95 billion patacas a year ago. The dip was in line with the analysts’ expectation of flat to down 6%. While the same was up 4.4% in February, it declined 5% in January. Slowdown in China and the trade war between Beijing and Washington continues to impact casino operators in Macau. The downside can also be attributed to smoking ban that came into effect on Jan 1 and not so encouraging environment ahead of the Chinese New Year holiday.

The recent volatility in gambling revenues from Macau is likely to impact companies such as MGM Resorts International MGM, Melco Resorts & Entertainment Limited MLCO, Wynn Resorts, Limited WYNN and Las Vegas Sands Corp. LVS. This is because these companies generate majority of their revenues from Macau.

In 2018, gambling revenues from Macau increased 14% to 302.85 billion patacas ($37.6 billion). Analysts expect the improvement to be moderate in 2019. Speculations over another crackdown on capital outflows by China have kept investors on the edge. Meanwhile, flagging China property price has impacted the high-end VIP segment.

Hopes Hinge on Las Vegas Operations

Growing tourism in Las Vegas and rising demand for gaming and leisure will continue to boost the industry’s performance. Per a report published by Morgan Stanley on Jan 18, Las Vegas casinos will shine in 2019. Moreover, the firm suggests that investors looking to invest in casino stocks this year should look no further than Los Angeles-based casinos. Most of the companies are opting for alternative avenues to expand customer base and business. Additionally, casinos operators are collaborating with the hospitality sector, setting up luxury hotels and taking initiatives to improve gaming businesses. Since these non-gaming services generate higher margins, companies are increasingly focusing on other streams to drive revenues.

Moreover, legalization of sports betting outside Nevada has given the industry a new lease of life. The Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) that banned sports betting outside Nevada. The scope for casino operators will grow as illegally the activity is valued at billions of dollars annually in the United States.

Currently, sports betting has been legalized in Delaware, Mississippi, New Jersey, New Mexico, West Virginia, Pennsylvania and Rhode Island. Moreover, Connecticut, Illinois, Kentucky, Michigan, Indiana, Massachusetts, Maryland and some more states are likely to tread the same path in the coming months.

In the past three months, the industry has risen 13.7% compared with the S&P 500's 13.5% increase.

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Las Vegas Sands Corp. (LVS) : Free Stock Analysis Report
 
MGM Resorts International (MGM) : Free Stock Analysis Report
 
Wynn Resorts, Limited (WYNN) : Free Stock Analysis Report
 
Melco Resorts & Entertainment Limited (MLCO) : Free Stock Analysis Report
 
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