Good Times May Soon Return to Macau’s Casinos

(Bloomberg) -- Fattened by years of non-stop growth, Macau’s casino operators just struggled through their slowest month in almost three years. The good times, analysts say, may soon return.

Revenue at the world’s largest gaming hub slumped 8.3 percent in April, the third monthly decline this year, as China’s sluggish economy kept high rollers away from gambling tables. April was possibly the low point for Macau’s casinos, according to Sanford C. Bernstein, and the going may get better.

The Chinese economy, the biggest headwind, could be on a mend. It delivered a stronger-than-expected first quarter, when gross domestic product expanded 6.4 percent and industrial output jumped 8.5 percent. The mainland provides more than two thirds of Macau’s visitors to casinos owned by operators including Wynn Macau Ltd. and MGM China Holdings Ltd. Also, the growing mass market of casual gamblers is propping up declines among VIP visitors.

“Improvements in the economic environment in China, if sustainable, is positive,” Bernstein analyst Vitaly Umansky said in a report. Gross gaming revenue in Macau may rise between 2 percent to 4 percent in May, he said.

Union Gaming analysts led by Grant Govertsen, however, expect the recovery in Macau’s gross gaming revenue growth to come a tad later, in June. For the full year, casinos should notch up low single-digit percentage growth, Union Gaming said in a May 1 report.

New Challenges

Even as China growth worries start easing, the casinos may face challenges from other quarters. New Cotai Holdings LLC, an entity owned by U.S. partners in Macau casino venture Studio City, filed for Chapter 11 bankruptcy protection in New York on Wednesday, listing liabilities of $500 million to $1 billion.

While Studio City International Holdings Ltd. wasn’t part of the bankruptcy filing, the bankruptcy plea by one of its shareholders may risk the funding for its latest phase, Bloomberg Analyst Margaret Huang wrote in a May 2 note.

Melco Resorts and Entertainment Ltd., the majority owner in the venture, said in a statement Thursday that it doesn’t see any such impact on Studio City’s operations or planned expansion.

Macau’s casino operators are also getting traction from the promising mass market segment which has shown surprising strength. Boosted by holidays and a new bridge connecting linking Zhuahai to Macau and Hong Kong, day trippers and family tourists have been pouring in Macau. Also the weakness in the high-end segment hasn’t been not as bad as feared.

A six-member index of Macau casino operators climbed as much as 2.5 percent on Thursday in Hong Kong trading. SJM Holdings Ltd. was the top gainer with its shares gaining as much as 13.4 percent after it reported better-than-expected earnings, boosted by the mass market segment.

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net;Daniela Wei in Hong Kong at jwei74@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Bhuma Shrivastava, Ville Heiskanen

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