Macau gambling: October 2012 results = an all-time record high

Last week, the Macau Gaming Inspection and Coordination Bureau released its report on “Monthly Gross Revenue from Games of Fortune” for October 2012.  Here are the figures:

* 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%
Oct 27,700 26,851 +3.2% 251,011 221,200 +13.5%
Source: Macau DICJ

Golden Week, an important celebratory and vacation period in China, comes in October.  So the month typically marks the yearly high point for casino revenues.  So, too, it appears, in 2012.  In fact, last month was the all-time high water mark for casino “win” (i.e., the amount lost by bettors, which is what the casinos count as revenue).

The October figure can be taken in two ways:

1. the positive viewpoint:  It’s a staggeringly high amount.  Macau casinos in the aggregate took in $3.5 billion during the month.  This would imply that gamblers put down bets totaling $70 billion+ over the period.  That’s roughly the GDP of either Indonesia or the Netherlands.  It’s also an all-time record for Macau, achieved during a period of austerity in China.

2.  the negative:  The year on year comparisons of Macau’s gambling revenue appear to have bottomed in July, with a +1.5% gain.  That was followed by +5.5% and +12.3% in the two succeeding months.  One might have hoped that the accelerating trend would continue in October, thereby providing more evidence that a market rebound is in progress.  It didn’t.  The yoy comparison of +3.2% is the weakest in recent memory, save July.

From an investment point of view, I find it interesting that the market has chosen #1, the bullish interpretation.  All the casino stocks spiked up on publication of the figures.  Not only that, but other stocks tied to a rebound in Chinese high-end consumer spending, like Chow Tai Fook Jewellery, did as well.

At the very least, the DICJ figures from May onward appear to be saying that the Macau gambling market is bouncing along the bottom.  Stock price action seems to imply not only Hong Kong market belief that the situation won’t deteriorate from the current level, but that a period of stronger growth is imminent.  If so, the biggest beneficiaries will be companies like Galaxy Entertainment and Sands China (I own shares in Galaxy and in LVS), which have recently opened new casinos in Cotai.

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