Macau's 26-Month Losing Streak Is Finally Over

Gaming revenue in the month of August for Macau came in at 18.8 billion patacas, breaking Macau’s string of 26 consecutive months of year-over-year (Y/Y) revenue declines.

This figure, according to data released by the Macao Gaming Inspection and Coordination Bureau, is about 1.1 percent higher than August 2015’s number.
 

Analysts were expecting revenue growth on the month to fall somewhere in the -3 percent to +1 percent range.

Shares of Melco Crown Entertainment Ltd (ADR) MPEL, Las Vegas Sands Corp. LVS, MGM Resorts International MGM and Wynn Resorts, Limited WYNN were all up sharply in Thursday’s premarket session after a mixed month of August.
 

Related Link: Las Vegas Strip Revenue Up 16.7% In July
 

Is the Bottom Finally In?
One month of positive growth is certainly not enough to make a trend, but there have been signs of a bottoming process for months. Prior to August’s gain, Macau registered four consecutive single-digit declines. Growth numbers throughout the summer months have been helped by extremely weak 2015 comps.


 

February 2015 marked the "high point" for gaming revenue declines at -48.6 percent. June's GGR of only 15.8 billion patacas represented the monthly low for revenue during the current downturn and was the lowest monthly total Macau has recorded since September 2010.

While a single 1.1 percent monthly gain is not much to get excited about after more than two years of mostly double-digit declines, hopeful investors are cheering what could be an important first step in a return to long-term growth for Macau.

Is The Bad News Barrage Finally Over?
Macau has seen a seemingly constant stream of bad news over the past two years:
 In 2014, the Chinese government announced a crackdown on corruption in Macau.
 Increased government scrutiny coupled with a weakening Chinese economy led to a major falloff in VIP gamblers.
 In September 2015, headlines of potential junket embezzlement of up to $258 million dollars had investors worried about even more government regulation down the road.
 Macau’s new ban on phone betting began on May 9.
 Casino operators have been disappointed by the government’s table allocations for newly-opened resorts.

In addition, fears surrounding the impact of a potential VIP room smoking ban in Macau casinos have also weighed on share prices.

Sluggish Stocks
Shareholders of the four U.S.-listed Macau names are hoping that a bottom in Macau revenue growth means a bottom in share prices as well. The stocks of Las Vegas Sands, Melco Crown Entertainment and Wynn are all down more than 35 percent since the beginning of 2014.

Disclosure: the author is long MPEL.