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Macau Gambling Revenues Dip in November: Casino Stocks in Focus

Zacks Equity Research

Macau, the world’s largest gambling hub, has witnessed decline in Casino gross gaming revenue (GGR). In November, gaming revenues from the region declined 8.5%. Although, the decline was narrower-than-expected, the region recorded the second weakest number in 2019.

Gaming revenues from Macau decreased to 22.9 billion patacas ($2.8 billion) this November compared with 25 billion patacas a year ago. Notably, a slowdown in China and the trade war between Beijing and Washington continues to impact casino operators in Macau. Additionally, protests in Hong Kong as well as regulatory uncertainty over high-roller junkets negatively impacted the gaming industry.

At the VIP segment, demand has been impacted by the Chinese state media’s attack on Macau's major junket operator, Suncity. In October, gaming revenues from the region had declined 3.2%. Casino gross gaming revenue had declined for the seventh month during the year 2019.
Decline 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.

Is There A Silver Lining?

Despite dismal Macau performance, the gaming industry is benefiting from substantial opportunities in their domestic operations and the legalization of sports betting outside Nevada. Evidently, the industry’s has rallied 18.8% year to date.

Improving tourism in Las Vegas, and rising demand for gaming and leisure will continue to boost the industry. Additionally, casinos operators are collaborating with the hospitality sector, setting up luxury hotels and taking initiatives to boost gaming businesses. Since these non-gaming services generate higher margins, companies are increasingly focusing on other streams to drive revenues. Moreover, increase in millennial visitation and robust non-gaming revenues bode well for the industry.

Furthermore, the legalization of sports betting outside Nevada has given the industry a new lease of life. At present, most of the casino operators are focusing on expanding their sports betting footprint. Sports betting has been legalized in Delaware, Mississippi, New Jersey, New Mexico, West Virginia, Pennsylvania, Rhode Island, Montana, Indiana, Tennessee, Illinois and New Hampshire. In the coming months, Connecticut, Kentucky, Michigan, Massachusetts. Maryland, Minnesota, Missouri, Kansas, Louisiana, Oklahoma, South Carolina, California, Oregon, Arizona and other states are also likely to tread the same path.

Bottom Line

Volatility in Macau gaming revenues remains a concern for the industry. Moreover, the trade war between Beijing and Washington is an overhang.
However, continued innovation, increasing use of smartphones as well as other electronic devices and online gambling bode well for the industry.

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