Macau Drives Casino Operators' Shares - Analyst Blog

Share prices of most U.S. based casino operators increased after the Gaming Inspection and Coordination Bureau announced that gaming revenues in Macau increased 13.1% in March.

Leading casino operators Wynn Resorts Ltd. WYNN, Las Vegas Sands Corp. LVS, MGM Resorts International MGM and Melco Crown Entertainment Limited MPEL witnessed an upside on strong Macau data. Gaming revenues in the top gaming destination came in at $4.44 billion for the month.

The increase in revenues was almost in line with the expectation of most analysts but lower than a 40.3% increase in February, which was largely due to the Chinese New Year celebrations that began on Jan 31. However, the March results were far better than a 7.0% rise in January revenues. Taking the results of the past three months into account, Macau gaming revenues are up approximately 19.8% in the first quarter.

The double digit percentage increase for two consecutive months this year can be attributed to increasing visits.

One of the world's fastest growing-economies for the last three years, Macau has been a treasure trove for gaming operators who earn the majority of their revenues from here. In fact, it is the only city in China where gambling is legal.

Though there are no casino openings scheduled for this year, Wynn Resorts, MGM Resorts and Las Vegas Sands are all set to make multibillion dollar openings by 2016.

The development of facilities for entertainment, retail and convention centers would give visitors an added reason to visit Macau.  Meanwhile, improving infrastructure will shorten the journey to Macau from the Chinese mainland and drive visitation.

However, these growth expectations are tempered by macro economic uncertainties in China and slower credit growth that could impact liquidity of the VIP segment. Over the past several years, the VIP segment has contributed heavily to Macau revenues.

Currently, Wynn Resorts, Las Vegas Sands, MGM Resorts and Melco Crown Entertainment carry a Zacks Rank #2 (Buy).