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Macau Casino stocks drop as typhoon shutdown tipped to cost up to 1.5 billion patacas

Local casino stocks retreated Monday after Typhoon Mangkhut forced a 33-hour shutdown of the world’s biggest gambling hub, a halt that’s estimated to cost the city’s six gaming operators as much as 1.5 billion patacas in revenue.

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UPDATED: 22 Dec 2023, 5:45 am

Local casino stocks retreated Monday after Typhoon Mangkhut forced a 33-hour shutdown of the world’s biggest gambling hub, a halt that’s estimated to cost the city’s six gaming operators as much as 1.5 billion patacas in revenue.

Nearly all local casinos reopened at 8 a.m. Monday, after an informal agreement between the government and the six operators shuttered their doors at 11 p.m. on Saturday as the typhoon was approaching.

According to the website of the Gaming Inspection and Coordination Bureau (DICJ), the six operators own a total of 41 casinos.

The Bloomberg Intelligence index for Macau casinos fell as much as 2.1 percent in early trading in Hong Kong yesterday, with Galaxy Entertainment Group (GEG) and SJM Holdings leading losses.

The casino shutdown is expected to cost Macau from 1.1 billion patacas to 1.5 billion patacas in lost gaming revenue, estimated Union Gaming Securities Asia analyst Grant Govertsen.

Gaming industry staff said it was the first time Macau shut down all gambling in living memory. Macau started licensing casinos in the mid-19th century.

The storm disruption is expected by analysts to dampen casino revenue in Macau, with Govertsen and other analysts lowering the gaming hub’s outlook.

This month’s gross gaming revenue growth rate could be affected by as much as 7 percentage points, said Govertsen, who almost cut in half the firm’s previous forecast of a 15 percent increase. The super-typhoon’s impact is likely to cut third-quarter revenue growth by 2 percentage points, to 12 percent, he wrote in a note.

“This robs the month of one important weekend day,” which typically generate significantly higher gaming revenue than midweek days, Govertsen said in an interview. It would take a day or so for business to return to normal given how many flights and ferries were canceled, he added.

The shutdown is the latest blow to Macau casino operators after a rebound for the industry that began more than two years ago. Investor worries are growing over a pullback in spending by big gamblers as the Chinese mainland faces an economic slowdown and questions tied to the trade war with the US.

Shares of Galaxy dropped as much as 4.6 percent yesterday, with SJM tumbling as much as 3.9 percent and Wynn Macau falling as much as 3.2 percent. Casino shares fared worse than the benchmark Hang Seng Index, which declined as much as 1.8 percent.

“Investor sentiment could remain weak and volatile for now, given macro-uncertainties and likely earnings revision by the street, exacerbated by this typhoon/suspension news,” JPMorgan analyst DS Kim wrote in a note on Sunday. “September could be a month to forget.”

Kim also lowered this month’s gaming revenue growth forecast to low-single digits from a previous 13 percent estimate. The casino shut-down will also slow down this quarter’s revenue growth to 10 percent from the firm’s current forecast of 14 percent, the note said.

Still Ben Lee, a Macau-based managing partner at Asian gaming consultancy IGamiX, said the decision to shut the casinos was the right choice to ensure employees’ safety and noted the industry is “still in positive growth territory.” Lee also expects to lower his gaming outlook for Macau.

Junket operators and other industry officials had expressed relief at the shutdown, praising the government’s decision.

“This is the first time in Macau history that all casinos halted operations, to ensure the safety of employees,” said Stephen Lau, president of the Power Macau Gaming Association, an organization that represents casino workers. “We are seeing the government and casino operators no longer just put profit over the employees’ interest.”

Casinos in Macau have had 25 straight months of growth, boosted by high rollers and the opening of flashy new resorts in Cotai. Operations were disrupted last summer by Typhoon Hato, which caused 10 deaths. While casinos continued to operate during that storm, the government estimated the economic loss to Macau amounted to 12.6 billion patacas.

Casino stocks tumbled last Tuesday after Deutsche Bank lowered its forecast for gaming revenue growth in Macau. It cut its 2019 outlook by more than half, to 4 percent growth from 11 percent previously, citing concerns about the VIP segment and saying Macau appeared to be at the start of a downward earnings revision cycle.

Morgan Stanley, however, wrote last Thursday that casino shares may be poised for a 50 percent rebound. Based on the last cycle that ended in July 2012, shares are expected to recover on the back of improving earnings, it wrote in a note, helping a two-day rebound in the benchmark casino gauge.

Macau’s gross revenue generated by games of chance rose 17.1 percent year on year to 26.55 billion patacas last month, according to DICJ figures.

UPDATED: 22 Dec 2023, 5:45 am

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