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MPEL, WYNN, LVS Along With Others Will Feel The Pinch Of Macau Revenue Drop


There will not be any respite for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), and Las Vegas Sands Corp (NYSE:LVS) in respect of Macau. The region will continue to offer lower than the expected level of revenue for the three companies. An indication to this effect could be interpreted from the comments made by the Secretary for Economy and Finance, Lionel Leong Vai Tac. The senior official said that gross gaming revenue for June might fall to approximately MOP16 billion or $2 billion.

Steep Fall

In the previous quarters too, revenue from Macau remained a big concern for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), and Las Vegas Sands Corp (NYSE:LVS). Leong indicated that in the last few years, June has witnessed lower revenue sequentially than May.

Based on the current expectation, revenue drop will be 21.2% from May’s gross gaming revenue of MOP21.3 billion. On a YOY basis, it would represent 41.2% fall. The downtrend in the gaming revenue will undoubtedly hurt the three companies’ revenue in the second quarter that ends in the current month.

Retrenchment Measures

The government official indicated that several bodies have already initiated the process of retrenchment on public spending. The government’s decision might not be surprising since Leong has given enough indications about it in April itself. He said then that if the monthly gaming revenue drops less than MOP18 billion, then the government will not have any alternative but to resort to spending cuts.

However, he assured that there will not be any issue in respect of annual cash handout to the Macau resident. Similarly, there will not be any adjustments about social, as well as, medical services.

Analyst Comments

Meanwhile, CLSA Ltd said that it surveyed about 240 people from Guandong. The survey indicated about 65% of the respondents visited only one casino per Macau visit while 29% of the respondents visited two casinos per Macau trip. Strangely, only 6% of the respondents indicated to have visited three places. The survey should be a worrying factor for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), and Las Vegas Sands Corp (NYSE:LVS).

Analyst, Aaron Fischer, said that he expected more people to visit two or three casinos. The casino operators in the city provided significant effort to meeting, as well as, greeting tourists on arrival at the main ferry posts to boost their visits to casinos. According to the CLSA survey, close to four out of ten people surveyed indicated their preference for Grand Lisboa, as well as, Venetian.

Points To Ponder

Significantly, the survey indicated that 55% of the respondents indicated that they will visit the same number of times in the next three-year period. While 23% preferred visiting more frequently, 22% indicated going casinos less.

That is not a good news for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), Wynn Resorts, Limited (NASDAQ:WYNN), and Las Vegas Sands Corp (NYSE:LVS) for their upcoming quarters.

Viraj Shah

Viraj Shah has completed M.Com (Finance) and is currently pursuing his CFP. He tracks US markets along with other global markets like India very closely. He is very passionate about stocks, real estate, and technology. He also believes that money can always be made in the market.

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