Casino stocks drop as Macau slump continues

stocks drop

The casino-dense region of Macau experienced a drop in stock value as recent numbers fail to meet expectations from earlier in the year, causing difficulty for investors.

Nicknamed the “Las Vegas of Asia”, Macau remains the world’s largest gambling hub, surpassing Sin City’s annual gaming revenue nearly ten-fold. Regardless of overall revenue, the shareholders of Wynn Resorts Ltd. and Las Vegas Sands Corp. have reported a tumble in numbers for the second month in a row since May 2018.

At the beginning of the week, financial analysts reported that the shares of Wynn Resorts closed down almost eight percent per share, its worst since January of this year, and combined shares of Las Vegas Sands and MGM Resorts International dropped nearly seven percent.

According to Macau’s Gaming Inspection and Coordination Bureau, although total GGR for June increased by 12.5 percent to nearly $3 billion compared to the previous year, these numbers failed to meet estimated projections with analysts reporting a total capped off at just 12.5 percent for June, well below the 18 percent median estimated earlier in the year.

World Cup causes concern

World CupIn addition to the slow numbers for the past two months, Macau continues to endure the brunt of the negative impacts of the World Cup as sports enthusiasts throughout the region bet with illegal bookies and online operators. The casino floors are seeing less action, and the VIP-player dominated market continues to see lukewarm figures. VIP players account for nearly half of Macau’s total casino-gaming revenue, yet the previous two months have seen less frequent action.

Although the 2018 World Cup started in June, Macau’s slow GGR growth already started in May of this year, leading to the fact that sports betting is not the sole reason for stagnation.

A change in climate

gamblingU.S. casino operators have steadily been shifting their shares and betting big in Asia’s largest gambling enclave due to weaknesses at home.

Wynn and Las Vegas Sands both receive more than 50 percent of their revenue from Macau and MGM Resorts International has stated that nearly 21 percent of its revenue comes from the region.

Just this past February, MGM Resorts International debuted a $3.4 billion property in the region, serving as competition with the Las Vegas Sands’ Parisian and Wynn Palace. Despite big investments, a recent proposal by Chinese authorities to allow for gambling on a nearby island has also left some uncertainties over Macau’s future and dominance over the gaming market.

Statistically, this is not the first time that Macau’s casinos have experienced financial turmoil. A corruption probe in 2014 sent revenue down to a five-year low, from which the region’s IRs have slowly bounced back, but the investors fear that the new slump in numbers could leave a lingering impact if the trend continues.

Financial analysts DS Kim and Sean Zhuang agree that Macau’s June GGR is a combined result of slow seasonality due to the summer holiday as well as the negative impact of the World Cup. If the weak GGR continues into July, the region will face its toughest comparison in terms of year-to-year growth July 2017 at just over 29 percent in GGR.

Both analysts and investors throughout the region will continue to keep a close eye on the numbers as the summer season of casino gaming for Macau continues.

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A Massachusetts native, blogger Angeline Everett grew up in the Allston neighborhood of Boston and earned a degree in casino management from the University of Massachusetts-Amherst. After graduating, Angeline moved to Atlantic City where she joined the young team at the Borgata Casino as a compliance representative, while blogging on the side. After a few years in the back office, Angeline moved to the floor to work first at a casual poker dealer and later casual poker floor supervisor. Fascinated with games of chance since she was a child, Angeline currently divides her time between blogging and work on her first book.