James Packer's Macau casino venture Melco Crown Entertainment rallied in US trading on signs that a slowdown in the gambling hub may not be as severe as expected.
American depositary receipts of Melco Crown, which is 34 per cent owned by Mr Packer's Crown Resorts, rose 3.4 per cent to $US18.07 in New York on Tuesday, meaning their gains since the end of September to 33 per cent. Macau casino shares rose in Hong Kong trading earlier after analysts said gaming revenue was stronger than expected this month.
While Macau's gaming revenue has fallen for 16 straight months, better-than-estimated casino receipts after the Golden Week holiday may lead to the smallest decline since January, Credit Suisse analysts said Monday. Macau, the world's biggest gambling destination, has suffered the worst downturn in its history as an anti-corruption crackdown in China and slowing economic growth have kept high rollers at bay.
"The Golden Week domestic consumption numbers look very, very strong," said Brendan Ahern, managing director at Krane Fund Advisors in New York. "The sentiment going in for the broader casino and gaming was low, so they had a very low hurdle to overcome."
Macau's estimated average daily revenue was 827 million patacas ($143 million) during the first 11 days of October, higher than Credit Suisse's forecast of 750 million to 800 million patacas. Casino receipts so far this month may lead to a drop of 25 per cent to 28 per cent in October, the broker said.
Macau stimulus
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Hong Kong-based Melco Crown has rallied this month amid investor optimism that the company will benefit from targeted government stimulus measures. Macau's gaming industry revenue is estimated to rebound 8 per cent in 2016, with Melco Crown's jumping 24 per cent, according to data compiled by Bloomberg Intelligence.
Melco Crown may have clinched the approval of 210 new gaming tables for its Studio City casino-resort, which is scheduled to open on October 27, and another 40 by the end of the year, Credit Suisse wrote, citing Asia Gaming Brief. Its gaming analysts raised the shares to the equivalent of buy from neutral. The addition would equip the company's Studio City resort opening in October with the city's most extensive mass-market attractions.
The company will be the first Macau operator with major operations abroad, opening a Manila resort earlier this year. It has doubled quarterly sales and tripled EBITDA since late 2009, even with the impact of China's slowing growth and anti- extravagance push.
"There are industries that, regardless of what's going on in the macroeconomic front, will continue to do well, and I think gaming is one of them," said Wayne Lin, a money manager at QS Investors, which invests in Chinese stocks. "You could be seeing the emergence of a true Chinese middle class supportive of the gaming industry."
Bloomberg
