Although U.S. casino executives are whooping it up that anti-corruption probes are being curtailed in China, the damage continues to be done, judging by last month’s numbers in the VIP sector. The latter was down 26% while mass market play was up 15%. MGM Grand Paradise and Wynn Macau increased their mass-market table play by 36% and 29%. Already heavily exposed to the mass market, Sands China managed a relatively lean 15% increase, while Melco Crown Entertainment shot up 37%, improving dramatically on its summer gains.
Analysts warn of the oncoming effect of a weak Golden Week and the effects of a smoking ban on Macao‘s casinos. J.P. Morgan analyst Joseph Greff projects further mass-market growth and VIP decline for this month, writing, “We (still) prefer MGM and WYNN over MPEL and LVS, in the near term, with the former possessing less estimate risk than the two latter names.”
Golden Week intelligence compiled by Deutsche Bank analyst Carlo Santarelli points to an October decline of 33% in VIP play and a 9% increase in the mass market. The leading operators, each bunched a point apart, are Galaxy Entertainment (23% market share), Las Vegas Sands (22%) and Sociedade de Jogos de Macau (21%).
Santarelli’s pick to click is MGM. “While upgrading MGM in the face of shaky Macau fundamentals is difficult, we worry that trying to bottom tick will ultimately result in missing what we believe is likely to be a compelling multi-year long trade. At the very least, we feel the LV visibility and firm/stable trends are likely to cause MGM to outperform its peers should expectations for a rebound and return to growth in Macau get further clouded,” he writes.
Santarelli also downplayed the potential of the Japan market on Sands, toward which he took a cool view. He wrote that “in the case of LVS, we 
struggle with the lack of visible and sustainable catalysts. At present, we see LVS as the least likely of the 3 Macau operators in our coverage universe to experience a meaningful lift upon stabilizing trends in Macau for the following reasons: 1) share losses stemming from the lack of a truly needle moving development by which to drive growth in the medium term and underperformance relative to fair share historically, 2) heightened Macau VIP risk relative to peers, and 3) Consensus estimates remain meaningfully elevated and are largely predicated on mass market mix driving margin expansion in 2015, something we no longer believe to be likely.”
I hope Santarelli’s not expecting any Christmas cards from Sheldon Adelson this year.
* A shortage of table-game dealers remains a looming crisis for Macao. Paradise Entertainment thinks it has the answer: electronic table games and lots of them. The company expects its inventory on Macanese casino floors will grow by 50%, to 20,000 by 2017. Thanks to a joint venture with International Game Technology, Paradise believes it can increase its inventory to 60% of all e-table games in Macao.
* There’s an identity crisis at Newport Grand slot parlor in Rhode Island. As the casino campaigns for full-fledged gambling status it’s promising an ice rink of “Olympic” dimensions, for which the casino’s parking lot would be cannibalized. They’d also provide a new home for the Newport Summer Comedy Series. The ex-jai alai fronton is campaigning table games and raising its ante with voters with these new promises. They’ll even take the word “slots” down from the building if the voters give them what they what. If the electorate doesn’t cooperate, it will spell finis for a conditional purchase and a $46 million upgrade.
