Macau casino gaming, September 2012

September gambling results

Earlier this month, the Macau government’s Gaming Inspection and Coordination Bureau released its monthly report of gaming “win” for the SAR’s casino industry.  The figures are as follows:

* 1 HKD = 1.03MOP (Unit:MOP million )
Monthly Gross Revenue from Games of Fortune in 2012 and 2011
Monthly Gross Revenue Accumulated Gross Revenue
2012 2011 Variance 2012 2011 Variance
Jan 25,040 18,571 +34.8% 25,040 18,571 +34.8%
Feb 24,286 19,863 +22.3% 49,325 38,434 +28.3%
Mar 24,989 20,087 +24.4% 74,314 58,521 +27.0%
Apr 25,003 20,507 +21.9% 99,317 79,028 +25.7%
May 26,078 24,306 +7.3% 125,395 103,334 +21.3%
Jun 23,334 20,792 +12.2% 148,729 124,126 +19.8%
Jul 24,579 24,212 +1.5% 173,308 148,337 +16.8%
Aug 26,136 24,769 +5.5% 199,444 173,106 +15.2%
Sept 23,866 21,244 +12.3% 223,310 194,350 +14.9%

Source: Macau DICJ

Initially the Hong Kong stock market took the September figure of 23.9 billion patacas (US$3.1 billion) as disappointing.  For reasons best known to themselves, the consensus of Hong Kong gambling industry analysts had been that revenue should be up by 17% (I have no idea why they were so bullish).  As a result, on the day of the report the stocks all sold off.  But they rallied back the next day, as the market began to look at the accelerating pattern the year to year comparisons appear to be establishing over the past three months.

October as a key

October, which contains Golden Week–normally the period of the highest demand for gaming during the year–will be important to monitor.

October 2011 gaming win was 26.9 billion patacas, a 26% month on month increase over normally weak September.  I would take a gain of 15%+ for October this year as a signal that the market has already hit bottom and is on the mend.

an important time

In my view, the Macau gaming market is at a crucial juncture, one that participants in capital-intensive industries dread.  Casino capacity has expanded to the point where it, at least temporarily, outstrips demand.  How so?  A number of big new casino projects, started several years ago, have been coming on-line just as economic slowdown in China is putting a crimp on high rollers’ desire to gamble.

I think the casino operators and the Macau government have been reacting to the situation in an unusually sensible way.  New casino approvals have dried up.  Operators have been stretching out the timetables for already initiated projects–Sands China, for example, has already paid a penalty to the government so it can postpone by a year the opening of its latest Cotai expansion.  At the same time, casino companies have used the current period of extraordinarily low interest rates to lock in their project financing on favorable terms.

It seems to me, therefore, that intra-industry dynamics are not the big worry they would be in, say, the cement or paper or high-rise building construction.  The most important steps to stimulate global economic recovery are already being taken.  So holders of Macau casino stocks (like me) are simply waiting for evidence that will show the timing of the market’s rebound.

My thought has been that a significant pickup in demand will be a 2013 phenomenon, not a 2012 one.  I’m not yet willing to act, but the pattern of recent yoy market win comparisons suggests to me I may be being too pessimistic.

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