Macau gambling review may aid casinos, stocks recover
Written on October 14, 2009
Macau’s move to review gaming rules in the world’s fastest-growing gambling market could brighten the outlook for casino stocks as potential curbs would help profits by limiting oversupply, analysts said on Tuesday.
Shares of Macau casino operators recovered most of their losses after falling as the Macau government (www.gov.mo.) said it was considering rules that might limit the number of tables and raise the age limit for casino customers.
Analysts and brokers however said investors’ fears were overdone and did not reflect the outlook of Macau’s six casino operators, among them Las Vegas Sands, Wynn Resorts, Galaxy, SJM Holdings Ltd, Melco Crown Entertainment Ltd and a casino run by MGM Mirage and local businesswoman Pansy Ho.
“It’s more psychological,” said Francis Lun, a general manager at Fulbright Securities, referring to the stock falls on Tuesday. “The problem of Macau now is oversupply, so if the government restricts the supply, it is good for the existing players.”
Macau, once a Portuguese colony and now a special administrative region under Chinese rule, has repeatedly sought to rein in the explosive growth in the only market in China where gambling is legal.
Shares of Wynn Macau, the Asia unit of U.S. casino giant Wynn Resorts, lost 1.1 percent before turning positive, and SJM Holdings, Macau gaming tycoon Stanley Ho’s flagship firm, was down 3.5 percent savings account payday loans.
Galaxy Entertainment Group and Melco International were down 1.4 percent and 3.8 percent, respectively.
Some of the stocks later pared those losses, with Wynn Macau even rising slightly above Monday’s close.
The new rules appear to be aimed at cleaning up an industry that has seen explosive growth in the last three years.
Earlier government strictures, dating from April 2008, included a moratorium on new casino licenses and a building freeze, moves seen as motivated by an increasingly concerned Beijing.
RED-HOT GROWTH
Macau generated HK$105.6 billion ($13.5 billion) of gross gaming revenue in 2008, more than double the HK$46.7 billion generated by the Las Vegas Strip during the same period.
Shares of Macau casino operators have soared in the past month after gambling revenues in the enclave rose to a new high in August, signaling a faster-than-expected recovery in Macau.
Galaxy rose 17 percent, SJM gained 16 percent and Melco Crown rose 6 percent, beating a rise of 2.5 percent in Hong Kong’s benchmark Hang Seng Index .HSI.
Rules now being considered include raising to 21 from 18 the age of entry into casinos and moving slot machine halls to commercial zones away from residential areas.
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