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Macau Gambling Revenues Rise in June: WYNN, LVS, MLCO Gain

Zacks Equity Research

Macau, the world’s largest gambling hub, has witnessed an increase in Gross Gaming Revenue (GGR) in June. Despite concerns related to the economic slowdown in China and the trade war between Beijing and Washington, gaming revenues from the region increased for the second straight month.

In June, gaming revenues from Macau increased to 23.81 billion patacas ($2.95 billion), up 5.9% from the year-ago period. The increase was sharply above the market expectations of 1-3% gain. While the metric rose 1.8% in May, the same declined 8.3% and 0.4% in April and March, respectively. Despite the sharp gain in June, gaming revenues from the region declined nearly 0.5% in the first half of 2019.

Following impressive Macau gambling revenues, shares of companies such has Wynn Resorts Limited WYNN, Las Vegas Sands Corp. LVS, Melco Resorts & Entertainment Limited MLCO and MGM Resorts International MGM increased 5.9%, 4.9%, 5.1% and 0.4%, respectively. Notably, these companies generate the majority of their revenues from Macau.

In the past six months, the industry has increased 16.4% compared with the S&P 500's 18.8% gain.

What Lies Ahead for the Industry?

Although casino operators generated solid revenues from Macau in May and June, the second quarter of 2019 is likely to witness flattish growth due to the trade war between Beijing and Washington.

In 2002, China exposed Macao's gambling business to outside competition, which proved beneficial to the U.S. casino operators. However, with the trade fiasco, speculations are rife that China may reconsider the presence of notable U.S casino operators in Macao. Moreover, China may demand casino operators to apply for new concessions from the government before 2022.

While the tariff war is proving detrimental to the companies with large Macau operations, the flagging China property prices are hurting the high-end VIP segment. Increased costs due to the current situation will hurt these companies further.

However, we believe that casino operators have substantial opportunities in their domestic operations. Rising tourist visits to Las Vegas is proving conducive to most companies in this space. Additionally, growing tourism in Las Vegas, and the rising demand for gaming and leisure will continue to boost the industry’s performance.

Casinos operators are also 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.

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MGM Resorts International (MGM) : Free Stock Analysis Report
Las Vegas Sands Corp. (LVS) : 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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