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Jefferies Gaming and Lodging Daily Digest: Macau Gaming Revenues YoY Growth

June 2, 2011 11:19 AM EDT
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Jefferies Gaming and Lodging Daily Digest

Jefferies analyst said, "The Macau DICJ reported May 2011 gross gaming revenues of 24.3 billion patacas, which was the highest monthly gross revenues ever and represented YoY growth of 42.3% (despite the most challenging comp of the year at 94.1%) and a sequential increase of about 18.5% off of a strong April. The official release does not break down property-specific performance, nor does it provide hold percentages or commission trends, but it does imply directional, qualitative trends."

"We note that the results in aggregate offer a bullish data point for all operators in the region, including Wynn Resorts (Nasdaq: WYNN)(Buy), MGM Resorts (NYSE: MGM)(Buy), and Las Vegas Sands (NYSE: LVS)(Hold) considering that our respective property forecasts incorporate 2Q11 YoY growth of 18.4%, 60.3%, and 9.1%, respectively. We would note that WYNN's Encore recently anniversaried its April 2010 opening while MGM has been more proactively managing its property in the recent past."

"We believe these results are consistent with our Macau market outlook, as well as the Street's expectations of YoY growth between 40% to 45%. Importantly, we believe May trends imply that the recent opening of Galaxy Macau on May 15 appears to be having an additive effect on the Macau market's gaming revenue levels, which is further supported by indications from various Macau property management team's commentary during our meetings in Macau last week. Accordingly, we believe that casino revenues will continue to be strong in 2011 despite challenging comparisons, and should likely continue to benefit from the recent introduction of new supply to the market. We are forecasting casino revenue growth of about 19.0% for 2Q11 and 23.9% for FY2011, which we believe could prove conservative, although comparisons of 65.0% and 70.4% lie ahead in the next two months. WYNN remains the cleanest story of the group, with factors beyond Macau driving the shares of MGM and LVS."


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