All Bets Are on New Resorts to Fuel Macao's Next Growth Wave
Snapshot
Macao is the largest gaming hub in the world and the only place in China where gambling is legal. The region has seen extraordinary growth in the past decade and a half. It has also seen a similar fall ever since the Chinese government imposed anti-corruption restrictions in 2014. This has scared away most of the VIP gamers that once flooded the region.
Stock movement
The Macao region has establishments from various international gaming companies such as the Las Vegas Sands (LVS), Galaxy Entertainment, Melco Crown Entertainment (MPEL), MGM Resorts (MGM), and Wynn Macao (WYNN). The stocks of these companies have seen sharp falls ever since the Macao region revenues started to fall in July last year. As evident from the chart above, all the gaming stocks, except MGM, have seen strong double-digit falls this year with Wynn Resorts and Melco Crown suffering the worst.
This is because Melco Crown depends almost completely on Macao, as it only has a small stake in a small resort in the Philippines while Wynn’s revenue stream depends majorly on VIP gamers.
WYNN has lost ~55% year-to-date (or YTD), MPEL lost 38%, LVS lost 26%, and MGM gained 3%. The Market Vectors Gaming ETF (BJK) that replicated the Market Vectors Gaming Index has also lost close to 17% YTD. The broader market, replicated by the SPDR S&P 500 ETF Trust (SPY) remained flat in the same period.
Since June 2014, Las Vegas Sands (LVS) has seen a 45% fall in stock prices while MGM Resorts saw a 15% fall. Wynn Resorts saw the worse decline of about 71%, as it was heavily dependent on the region’s VIP players. Melco Crown fell by about 55%. Galaxy Entertainment has also fallen down by about 67% since June 2014.
Series overview
In the following series, we discuss how the gaming industry in Macao has been performing lately by analyzing various key indicators such as the gross gaming revenues and visitor arrivals. We’ll also look at the reason for the decline over the past quarters and look at how the Chinese economy will affect the companies in the Macao region.
Browse this series on Market Realist: