How Long Until Macau Bounces Back?

It's been more than four years since Macau surpassed the Las Vegas strip as the largest gambling center in the world. And U.S. companies didn't take very long to see the opportunities abroad, as all the majors -- Las Vegas Sands (NYSE: LVS  ) , MGM (NYSE: MGM  ) , and Wynn Resorts (Nasdaq: WYNN  ) -- have set up shop in the new gambling mecca.

Revenues had been surging and tourists flocking to the new destination, that is, until last month. Revenues in June dropped by 20% from May, as VIP gamblers threw fewer dollars onto the popular baccarat tables. The VIP segment is extraordinarily important, as it represents about 70% of Macau's total sales, so a decline there is not exactly what investors like to see. However, the widespread belief is that the World Cup bonanza was a major distraction for global tourism, and that Macau should bounce back next month.

Market share breakdown
For the big-time gaming companies, Macau has now become one of the most important, if not the most integral, part of their strategies moving forward. Take a look at how the market in Macau shakes out:

  • SJM Holdings: 30% market share.
  • Las Vegas Sands: 22%.
  • Wynn Resorts: 17%.
  • Melco Crown Entertainment (Nasdaq: MPEL  ) : 13%.
  • MGM Resorts: 8%.

Las Vegas Sands CEO Sheldon Adelson recently had this to say with regard to high rollers abroad: "We look at the breakdown of the (applications) for the credit and we find they're coming from the main three areas: Singapore, Malaysia and Indonesia. And there are lots of very high rollers. Substantially higher ... than we've experienced here in Las Vegas."

Hopefully those high rollers return, because since the disappointing June numbers were revealed, shares have really taken a hit. LVS has gone down 4%, MGM is down 15%, Melco Crown is down 4%, and Wynn has managed to stay relatively flat.

I don't doubt that Macau will bounce back, but softening demand from China, stricter lending, and potential decreases for VIP customers could mean it's a bit later than investors would like.

What do you think July's numbers will bring? Sound off in the comments section below!

Jordan DiPietro owns no shares mentioned above. Melco Crown Entertainment is a Motley Fool Global Gains selection. Try any of our Foolish newsletters today, free for 30 days. The Motley Fool has a disclosure policy.


Read/Post Comments (4) | Recommend This Article (17)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 22, 2010, at 12:08 PM, stockpicks4me wrote:

    Casino revenue to rise 72 pct in July

    Local gaming revenue may rise 72 percent this month from a year ago, according to analysts from CLSA and Deutsche Bank. In notes to clients quoted by Bloomberg on Tuesday, both companies point to an increase to about MOP 16.5 billion, up from MOP 9.6 billion in July 2009.

    According to Deutsche Bank’s Karen Tang, in the first 19 days of this month the casino revenue surged 80 percent, due to a “strong increase” in the VIP gaming volume. The industry got a boost from the end of the World Cup and the start of the summer holidays, the CLSA analysts said. “These numbers are expected to accelerate through until end of the month,” they added.

  • Report this Comment On July 22, 2010, at 12:56 PM, spokanimal wrote:

    Las Vegas Sands stock is performing spectacularly. If you compare the stock to the S&P index, and adjust it for it's beta of about 3.0, it would be selling in the teens if it were performing in lockstep with the market adjusted for beta.

    So to say LVS's shares are "taking a hit" is crazy... it's putting down some of the best, beta-adjusted, relative strength that you'll find about ANYWHERE out there.

    S.

  • Report this Comment On July 22, 2010, at 2:16 PM, MutualFundMonday wrote:

    Isn't this article about Macau? Adelson's high rollers comment was in regards to Marina Bay Sands.

  • Report this Comment On July 22, 2010, at 2:17 PM, MutualFundMonday wrote:

    Marina Bay Sands = Singapore.

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