Macau gaming results for September
On October 4th, while the Hong Kong stock market was closed, Macau’s Gaming Inspection and Coordination Bureau announced total gambling “win” for the SAR’s casinos for the month of September. Brokerage house analysts in Hong Kong had hinted broadly that the number would be weak, due to supposed financial reverses being suffered by affluent mainlanders. There was also the negative effect of Typhoon Nesat, which forced a shutdown of schools, businesses and most transportation (but not the casinos themselves) in Macau on September 29th, to consider.
Nevertheless, the reported figure was another excellent one, as can be seen from the chart below:
| 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% | ||||
| Jul | 24,212 | 16,310 | +48.4% | 148,337 | 102,163 | +45.2% | ||||
| Aug | 24,769 | 15,773 | +57.0% | 173,106 | 117,935 | +46.8% | ||||
| Sept | 21,244 | 15,302 | +38.8% | 194,350 | 133,237 | +45.9% | ||||
If we adjust the figures for the negative effects of the typhoon, on the idea that Macau lost a day’s gambling business (I think two days might be more realistic), then the gross gaming revenue for the SAR in September would be MOP 21.977 billion, and the year on year gain would be 43.6%.
massive selling ahead of the report
There has been huge selling of the Hong Kong-listed Macau gaming stocks since a report from a prominent analyst at Deutsche Bank predicted that a sharp slowdown in the growth of the Macau gaming market was imminent. Even though Las Vegas Sands was quoted in the Wall Street Journal and the Financial Times on October 2nd as saying that the company saw no signs of weakness in September, selling in Hong Kong seems to have reached a crescendo on October 3rd. On that day, most Macau gaming stocks fell over 10%; SJM, whose casinos generate about a third of Macau’s total gaming revenue, lost 25% of its market value.
Yes, this was a little (more than a little, in my view) crazy. The only sense I can make of the sharp declines is that short-term traders feared weak revenue numbers would be released by the Macau DICJ while Hong Kong was closed on October 4-5. Maybe they had no time to read the papers.
where to from here?
It seems to me that the recent selling in world equity markets, including Hong Kong, has been driven by fears of an implosion in the EU financial system, leading in Lehman-like fashion, to a freezing up of world trade and a consequent severe global economic turndown. However unlikely this scenario may be, a turn in the mood of short-term traders will probably require concrete evidence that this won’t happen. Hence the focus of eyes and ears on Germany and France.
For the Macau casino stocks, the idea that a substantial downshift in gambling by affluent mainlanders is “just around the next corner” is a difficult one to disprove, no matter how many corners are successfully negotiated. In addition, the market participants who dumped out casino shares at, say, 5x normal volume and at prices 25% below today’s prices will have a hard time convincing either themselves or their clients that they should buy the stocks back any time soon.
So the bearish mood surrounding these stocks may remain for a while.
On the other hand, the companies seem to me to have excellent long-term (and short-term) prospects and to be trading at unusually low valuations.