Comparing Dow Jones US Gambling Index with Macau Gross Gaming Revenue (GGR)

Macau gaming stocks are signaling a change in trend after a two-year slump. It seems that the Macau gaming industry is stabilizing in the 1st quarter of 2016 after revenue dropped to a five-year low in 2015. Since the beginning of 2016, the year-on-year decline in Macau Gross Gaming Revenue is narrowing with a YoY decline of 13,3 % in Q1 compared to a decrease of 34 percent for full year of 2015.

Since end of January, there has been a rebound in stock prices of Macau-related gaming operators traded in the US.  According to analysts,this has been justified by the fact that the “fundamentals are stabilizing”. The DJUSCA Gambling Index started to rise after 2 consecutive years of decline, pushed by largest Market Cap stocks that have foot print in Macau.

WYNN : +68% in 3Mth

LVS (Las Vegas Sands): +33% in 3Mth

MPEL (Melco Crown): +21% in 3 Mth

MGM: + 14% in 3 Mth

Is the decrease in GGR over and will Gaming Stock Market Rebound?

More likely not: GGR will continue slightly to decrease and readjust to market fundamentals:

• VIP Revenue will continue to readjust: Anti-Corruption Campaign is the most emblematic feature of Xi Jinping's political brand and will continue until the end of his mandate in 2022.
• China Economy growth is the slowest in 25 years: China expanded 6.7 % on-year in the first quarter 2016, according to official data released on 15 April 2015.
• Investors expect Bank of China to depreciate the yuan as Chinese Economy is slowing down
• Macau’s casino industry faces a risk of overcapacity, as it is expected approximately 750 new live gaming tables are to enter the market over the next 12 months.

Gaming Revenue growth will more likely return when large-scale transport infrastructure projects to Macau and in the city will be completed – including the bridge connecting Hong Kong, Zhuhai and Macau, and the light rail transit system.