It’s not often that the market sees news of a 38.8 percent year-over-year drop in revenue as a good thing, but that’s the case for stocks of Macau casino operators today.
According to data released by the Macao Gaming Inspection and Coordination Bureau, gaming revenue in the month of April came in about 39 percent lower than February 2014’s level.
However, expectations were extremely low in the market, and shares of Melco Crown Entertainment Ltd ADR WYNN 3.97%, and Las Vegas Sands Corp. (NYSE: LVS) are all trading higher by more than 1.0 percent following the news.
MGM Resorts International MGM 0.61% shares are down slightly.
Has Macau Finally Reached Rock Bottom?
April marks the tenth consecutive month of negative gaming revenue growth in Macau, but there is hope for investors that Macau has reached a turning point.
February marked the high point for gaming revenue declines so far in 2015 at -48.6 percent. As year-over-year comps began getting easier in March, the last two monthly numbers have come in at nearly exactly -39 percent, a sign that the Macau market could finally be stabilizing.
The End Of The Bad News Barrage?
Macau has seen a seemingly constant stream of bad news over the past year. Last year, the Chinese government announced a crackdown on corruption in Macau.
Increased government scrutiny coupled with a weakening Chinese economy led to a major falloff in VIP gamblers.
In addition, recent talks of expanding the partial smoking ban instituted in Macau casinos in October and capping the number of visitors to Macau from mainland China have increased pressure on stocks.
The Benefit Of Low Expectations
Expectations seem to be extremely low for Macau moving forward. Even the 38.8 percent decline in April revenue was in-line with consensus estimates of a 38-40 percent drop.
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