Macau Limits Casino Growth - Analyst Blog

Recently, the Macau government announced its plan to limit casino growth in the region. According to the plan, new projects would not be approved while only 500 new gaming tables will be allowed in the next three years. The Macau government, which derives nearly 70% of its revenue from gaming, is seeking to diversify the city’s economy.

 

Macau has become an attractive destination for the casino companies such as Las Vegas Sands Corp. (LVS), Wynn Resorts Ltd. (WYNN) and MGM Mirage (MGM), who are investing billions for expansion on this island. Macau is the only Chinese city where gambling is legal and has survived the economic downturn relatively well.

 

However, the unchecked expansion of the gambling business in Macau has encouraged corruption, addiction and prostitution in that area. Also, there are concerns that people from mainland China are using their savings on gambling in Macau.

 

Currently, Macau has around 5,000 gaming tables and there are 6 licensed operators. Some of them have new projects under construction. Projects that have already been approved include the flagship project on Cotai by Galaxy Entertainment Group Ltd. and Sands' Cotai expansion project which is under development. However, unapproved projects have been withheld.

 

We expect this action to be positive for existing operators such as Las Vegas Sands and Wynn Resorts as this would control the supply of gaming tables in the market and increase the average yield per table.

 

Shares of Las Vegas Sands were up 96 cents or 4.59% to $21.89 while shares of Wynn Resorts were up $2.22 or 2.98% to $76.63 during Friday’s regular session on the New York Stock Exchange.