Slow Growth in China Bad for Gaming Stocks

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Slower growth expectations in China aren't a good sign for gaming companies, and that's why stocks were jolted in trading early this week. The big challenge is that more capacity is hitting Macau for the next few years, and the area needs growth to justify the massive investment companies are making. China's growth has fueled a growing middle class and the ability for more gamblers to take their bets to Macau. It's inevitable that China's overall growth and Macau's growth are linked, and that's worth watching if you're invested in gaming stocks.

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  • Report this Comment On June 29, 2013, at 1:04 PM, hulk04 wrote:

    When Edward Tracey CEO of Sands China say there has been NO slowdown and he sees no impact on VIP/gaming in Macau... I tend to believe him, we have had these scares over the past 3 years and ultimately the annual revenue continues to grow at robust 15% clip... if VIP slow it seems the mass market grows to off set (which is much more profitable for the casino companies)... It seems no matter how you try to scare it up the Chinese love to gamble and whether it be VIP or mass market them continue to go and grow the Macau gaming revenues month after month and YOY.

    With the increased infrastructure to allow a greater amount of the billion plus Chinese access to Macau there is no end in sight for growth...

    Good Luck to all investors long in LVS, Melco, Wynn and even MGM

  • Report this Comment On June 29, 2013, at 6:24 PM, spokanimal wrote:

    Hulk is correct. There are no signs of a slowdown in Macau of the nature that Mr. Hoium is suggesting.

    Although I do anticipate a "tailing off" of VIP gaming revenues as a result of the dip in the Chinese PMI report (the HSBC reading last week was 48.3. a reading belo 50 denotes contraction in manufacturing activity), Macau's mass-market gaming continues with unabated 30% YOY growth, which is fueled primarily by average middle class wages and salaries which continue at growth rates in excess of 14% YOY.

    Re: Mr. Hoium's comment that "more capacity is hitting Macau for the next few years"...

    ... this is, simply put, dead WRONG.

    The most recent, new capacity in macau was the final phase of Sand's "cotai central" development, which was completed in January. No further new capacity is anticipated in Macau until mid-2015 (galaxy phase 2) and early 2016 (Sand's Parisian), which is 2 years from now.

    Readers: Mr. Hoium is a young fellow who is not a securities analyst by conventional definitions and it relatively new to gaming commentary. It is wise to follow up on his commentary.


  • Report this Comment On June 30, 2013, at 9:38 AM, mbablitz wrote:

    Travis, I doubt added capacity will have any negative effects on Macau gaming stocks anytime soon. Macau restricts both labor and gaming tables to moderate boom and bust cycles in their employment and their economy.

    Macau has roughly 2% unemployment with strict imported labor quotas. That means almost everyone from Macau that wants to work, is working. It also means it is very difficult for people from other countries to get jobs in Macau. Those two things result in limited construction of new venues in Macau as workers have to go from one project to the next, sequentially. So, I have my doubts there will be any sudden over capacity of resorts, if ever.

    Next, Macau has tight gaming table quotas. Currently less than 6000 tables. There are 1.3 billion people in China with a middle class that is expected to triple over the next 9 years to 630 million, plus growing wages. All those people have gambling in their DNA, with only one legal place to gamble, Macau. Reading those tea leaves, I see excess demand for a limited supply of tables.

    So, if anything, added capacity will be good for the mega resort casinos.

    I'll even point you to another key metric, Macau's Gross Gaming Revenue... Just look at the growth. It continues to outpace expectations, setting records every month, on pace to hit over $40 billion this year...

  • Report this Comment On June 30, 2013, at 10:24 AM, cp757 wrote:

    Travis has a degree in Mechanical Engineering and he says he spent much of his free time and far too much of the company he worked for before they let him go (3M ) researching stocks.

    Mr. Hoium's comment that "more capacity is hitting Macau for the next few years" is irresponsible, and misleading, with no point in fact. It shows Hoium lack's the integrity to be truthful and that he want's to slant his point of view with information not supported by facts. Travis did you just pull that information out of your rear .....

    The comic's is a better place for Travis to post because as Spokanimal says Travis is " simply put, dead WRONG" on everything.

  • Report this Comment On June 30, 2013, at 1:00 PM, JF125780 wrote:

    No mention in Mr. Hoium's article of the late 2015 opening of LVS's Parisian Macao on the Cotai Strip, or the Hong Kong to Macao bridge coming in 2016.

    I don't know how much of a negative it is for LVS, but the constant "dumping" of granted shares by insiders of LVS sure looks bad to me. If management has confidence in their own ability to manage, why the constant sell-off by insiders? Do they take their cash and put it in a better investment __ better than LVS?

    When the stock market recovery begin and LVS reached a high of $62 plus, insiders could not wait for further gain __ the sell-off begin.

    Seemingly this fact remains:

    Unless recession becomes severe, people will continue to have their entertainment.

    And, gaming is great entertainment. Macao provides the best for the Asian market.

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