Macau Gaming Stocks Skyrocket Following Better-Than-Expected March

Posted on: April 2, 2019, 07:53h. 

Last updated on: April 2, 2019, 07:53h.

Macau gaming stocks are way up this week following the enclave’s March report that showed the enclave’s six licensed casino operators beat analyst expectations.

Macau gaming stocks GGR
Owners of the multibillion-dollar Cotai Strip properties were extra lucky last month, and that pushed Macau gaming stocks higher. (Image: Macau Magazine)

Gross gaming revenue (GGR) came in at $3.2 billion, a decline of 0.4 percent. However, the general consensus among analysts was a forecasted loss of between three and six percent.

March was better than feared,” JP Morgan Asia Pacific analyst DS Kim stated. He credited favorable outcomes on VIP play, and continued increases in mass market play for the better-than-expected result.

Casino shares subsequently increased on exchanges in both the US and Hong Kong. On the New York Stock Exchange, shares of Las Vegas Sands climbed four percent to $63.32. MGM Resorts increased the same percentage, with shares closing at $26.66.

Wynn Resorts – traded on the NASDAQ – was the biggest winner, as investors saw their stocks jump 8.4 percent to $129.31. Melco Resorts saw shares climb 7.5 percent to $24.27.

However, all four stocks remain down over the last 12 months. At this time last year, Wynn was trading 27 percent higher, MGM 21 percent, Sands nine percent, and Melco 12 percent.

What Recession?

There’s plenty of unease around the world regarding a potential economic recession.

According to Crain’s New York Business, a key recession indicator is the US Treasury yield curve. The metric compares the yields of short-term Treasury bills with long-term Treasury notes and bonds. When it costs more to borrow in the short term than long term, the rates hint that there’s unease in the economy.

For three months now, it has cost more to borrow in the short term than long. It’s the first time that’s happened in more than 10 years.

“At least for now, the inversion is pretty slight. The yield on the three-month Treasury bill is 2.455 percent and for the 10-year government bond it’s 2.450 percent,” Barron’s Senior Reporter Aaron Elstein explained. “It’s possible this situation won’t last long; some economists believe a full quarter’s worth of inversion is necessary to signal a recession.”

Full-Year Projections

After analysts initially predicted that GGR in Macau would decline in 2019, the experts are rethinking their outlooks. Morgan Stanley – which originally estimated a two percent decline – has amended its forecast and is now expecting a one percent gain.

Melco Resorts CEO Lawrence Ho said in January he believed the fears were overblown.

“The global economy has started to weaken, but at the same time, China mainland where we depend on heavily has been aggressively loosening policies, asking banks to facilitate more liquidity to small and medium businesses,” Ho stated. “The overall consumer sentiment is still okay.”

A one percent gain might seem trivial, but when dealing with the richest gaming hub on the planet, it’s of course a significant amount of money. If the one percent is realized, Macau casinos will report GGR of roughly $38.23 billion this year.

That’s a difference of nearly $378 million.