Macau Casino Revenue Growth Sees Biggest Gain Since 2014

(Bloomberg) -- Lady Luck is smiling on Macau.

Casino revenue in the world's biggest gaming hub posted its largest gain last month since February 2014 as high rollers beat a path back to the territory's tables.

Gross gaming receipts in May rose almost 24 percent to 22.7 billion patacas ($2.8 billion), according to data released by Macau's Gaming Inspection and Coordination Bureau Thursday. That beat the median estimate for a 16.5 percent increase in a Bloomberg survey of nine analysts and follows a 16.3 percent jump in April.

Bloomberg Intelligence's index of Macau gaming stocks rallied Thursday ahead of the results, gaining as much as 1.5 percent to 385.61. That's the highest level since April 2015. Wynn Resorts Ltd rose as much as 4.3 percent, Melco Resorts & Entertainment Ltd. increased 4.3 percent and Las Vegas Sands Corp. climbed 2.9 percent in New York.

Macau's gaming industry has now seen revenue climb for 10 straight months. The billion-dollar roll-outs of resorts by the local units of Sands and Wynn have paid off, enticing recreation gamblers and high stakes players. Gains in visitors, predominantly from China, to the world's largest gaming hub have also spurred the industry's rebound momentum.

“Luxury spending across China is up and that's a good proxy for the high-end of the Macau market,” Union Gaming Group LLC analyst Grant Govertsen said Thursday. “At this point, we think the mass market continues to grow at least in the mid-teens, while the VIP growth rate is improving notably.”

Hotel occupancy rates and retail performance in Macau are also improving, he said. Visitors to Macau in April increased by 11 percent to 2.74 million, while the territory's occupancy rate of 86 percent is the highest this year, according to data compiled by Bloomberg Intelligence.

After a two-year slump amid a crackdown on corruption by the Chinese government, high rollers who stayed away are now also returning. Revenue from the high-rollers segment is seeing a strong resurgence with more aggressive credit extensions, Deutsche Bank AG analyst Karen Tang wrote in a note Wednesday. Operators with high VIP exposure, including Wynn Macau and Melco Resorts & Entertainment Ltd. will benefit, she said.

Policy Risks

“The first five months have been way above everybody's expectation,” Lawrence Ho, the billionaire chief executive officer of Melco, said in an interview May 25. “People are traveling more, spending more, they are buying Louis Vuitton bags again. I think people are starting to feel comfortable again, after the anti-extravagance and anti-corruption campaign.”

Ho estimates that full-year Macau gaming revenue growth could be in the low- to mid-double digits from his initial call at the beginning of the year for a high-single digit gain, he said.

Still, risks remain from government policy to increase regulation of the $28 billion industry. Last month, Macau's government announced plans to require facial recognition and identification card checks at ATMs before cash can be withdrawn by mainland users of China UnionPay Co. cards, a stepped-up measure to curb money laundering and stem outflows. Chinese police in the same month cracked down on an underground banking channel to curb outflows, according to Chinese media.

That isn't dimming the outlook for gaming operators. Las Vegas Sands has seen growth in Macau's premium mass market of gamblers who spend between $3,000 to $5,000 daily, President and Chief Operating Officer Robert Goldstein said on a call with analysts Wednesday. He said he sees more Chinese coming to Macau in years ahead.

“The recovery we're seeing is both sustainable and can grow from here,” Goldstein said. “Our feeling in Macau is that the best days are ahead of it.”

--With assistance from Subramaniam Sharma

To contact the reporter on this story: Daniela Wei in Hong Kong at jwei74@bloomberg.net.

To contact the editors responsible for this story: K. Oanh Ha at oha3@bloomberg.net, Paul Barbagallo