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.
This Could Be the Fastest Way to Grow Wealth in 2019
Research indicates one sector is poised to deliver a crop of the best-performing stocks you'll find anywhere in the market. Breaking news in this space frequently creates quick double- and triple-digit profit opportunities.
These companies are changing the world – and owning their stocks could transform your portfolio in 2019 and beyond. Recent trades from this sector have generated +98%, +119% and +164% gains in as little as 1 month.
Click here to see these breakthrough stocks now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
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
To read this article on Zacks.com click here.
Zacks Investment Research