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| Dow Jones Newswires | 2:02 pm February 1, 2010 |
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By Shara Tibken
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)–Shares of casinos climbed Monday as monthly gambling revenue continued to jump in the Chinese gambling enclave of Macau.
Macau has become a key gambling area and vital market for American casino operators, even surpassing Las Vegas in gambling revenue. While Sin City and other areas such as Atlantic City have been suffering in the economic downturn, Macau has posted strong year-over-year results and revenue has soared since July. Reports Monday said the region posted a nearly 65% jump in gambling revenue in January, which Susquehanna Financial analyst Robert A. LaFleur noted is a new monthly record for the market.
Sterne Agee analyst David Bain said he originally expected a 30% rise in January, but boosted his expectations to an approximate 50% climb following interim data. Still, Macau’s results were even better than most expected.
“This is one case where investors are buying on the news,” Bain said, adding that he had modeled Macau revenue to climb about 15% in 2010, but now views the estimate as conservative following January’s jump and easing credit offered via junkets in Macau.
In recent trading,
Las Vegas Sands Corp
. (LVS) jumped 8.6% to $16.84, while
Melco Crown Entertainment Ltd
. (MPEL) climbed 5.3% to $3.76.
Wynn Resorts Ltd
. (WYNN) increased 4.8% to $64.88, and
MGM Mirage
(MGM) rose 5.3% to $11.65.
Sterne Agee’s Bain said Las Vegas Sands could be one of the biggest beneficiaries of a revenue increase in Macau as it has more mass play exposure than the rest of the group. Mass play has higher margins than VIP play, which accounts for over 65% of the marketplace. Bain estimates about 40% of Las Vegas Sands’ revenue in Macau comes from mass play, compared with less than 15% of Melco’s. Still, Melco is a pure play on Macau and would benefit from any gains.
Casino stocks have been volatile in recent months, trading heavily based on any news out of Macau. Mainland China visitors are restricted to visiting the area, and any news of tightening or loosening of visa restrictions by the Chinese government often affects the stocks.
Last month, stocks in various sectors dropped on concerns China may step up monetary-tightening measures to cool its economy following a 10.7% expansion in the fourth quarter.
Sterne Agee’s Bain said junkets have a different credit system, and the casino industry shouldn’t see an impact from the Chinese government tightening credit anytime soon.
“There’s definitely not [going to be an impact] in the near term, and we don’t see any significant impact for the next six months,” Bain said.
-By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today’s most important business and market news, analysis and commentary: http://www.djnewsplus.com/nae/al?rnd=qs15tWrVLLdzr4eA1z8i2A%3D%3D. You can use this link on the day this article is published and the following day.
(END) Dow Jones Newswires
02-01-10 1402ET
Copyright (c) 2010 Dow Jones & Company, Inc.
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