Macau September Revenue Tops Expectations: Is The Bottom Finally In?

It may be too soon to call it a streak, but Macau gaming revenue growth came in positive for the second straight month in September.

The latest data from the Macao Gaming and Coordination Bureau reveals that Macau brought in 18.3 billion patacas in September, up 7.4 percent year-over-year. Prior to August's 1.1 percent gain, Macau had registered 26 consecutive year-over-year monthly revenue declines.

The strong revenue number once again beat consensus analyst expectations of 0-4 percent growth in September.

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 between 9 and 24 percent in September following Macau’s August revenue beat.

Related Link: Las Vegas Strip Revenue Down 14.7% In August

Is The Bottom Finally In?

It may be premature to declare two months of positive growth 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 were 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 August’s 1.1 percent monthly gain wasn't  much to get excited about after more than two years of mostly double-digit declines, hopeful investors may see September’s number as a sign growth is now accelerating again in 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 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 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 27 percent since the beginning of 2014.

Disclosure: the author is long MPEL.