Macau gambling results: June 2011

The Macau Gambling Inspection and Coordination Bureau reported the June 2001 gambling win for the SAR’s casinos prior to the opening of New York trading on July 1st.

The numbers, in millions of patacas:

Monthly Gross Revenue from Games of Fortune in 2011 and 2010
Monthly Gross Revenue Accumulated Gross Revenue
2011 2010 Variance 2011 2010 Variance
Jan 18,571 13,937 +33.2% 18,571 13,937 +33.2%
Feb 19,863 13,445 +47.7% 38,434 27,383 +40.4%
Mar 20,087 13,569 +48.0% 58,521 40,951 +42.9%
Apr 20,507 14,186 +44.6% 79,028 55,137 +43.3%
May 24,306 17,075 +42.4% 103,334 72,211 +43.1%
Jun 20,792 13,642 +52.4% 124,126 85,853 +44.6%

Source:  Macau Gambling Inspection and Coordination Bureau

June was the first month in 2011 when market winnings exceeded those of the same period of 2010 by more than 50%.  The monthly take was the second-highest in the history of the SAR, exceeded only by May 2011–when results were aided by the Golden Week holiday.

The bullish GICB report seems to me to be behind the sharp rise on Friday in the price of the US parents of Macau gambling stocks–WYNN, LVS and MGM.

The case of the Hong Kong-traded subsidiaries, Wynn Macau (1128), Sands China (1928) and newly-listed  MGM China (2282), is a little more complicated.

1128 and 1928 have been correcting since early May, despite news of the extremely strong Golden Week results, as Hong Kong investors rotated toward locally-controlled, more mass market-oriented (and operationally weaker) casino operators. MGM China joined the other two almost the moment it IPOed.   The relative underperformance of the WYNN, MGM and LVS subsidiaries appears to have ended about a week ago, perhaps in anticipation of the June GICB report.

Trading in 1128, 1928 and 2282 over the next few days will be interesting to watch, the main question being the multiple that the market is willing to award to these shares.

In very simple terms, a 40%+ increase in yearly revenues will likely translate into a 60%+ increase in profits.  For, say ,1128. that would imply 2011 eps of HK$1.35-$1.40 (my guess is that the actuals will be higher, but then I own 1128, WYNN and LVS shares).  Wynn Macau peaked at 20x eps before falling by about 20%.  It seems to me that 20x isn’t particularly generous for the kind of growth this industry is exhibiting.  Will 1128 be able to exceed that multiple in the current rally?

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