Here's how Wynn and Galaxy lead Macau's gaming sector

Gaming revenue climbed 15% yoy.

According to Nomura, 1Q13 gaming revenue grew 15% y-y (vs. 4Q12: 10% y-y) and 6% q-q (4Q12: 8% q-q). It noted that Wynn and Galaxy recorded among the highest q-q revenue growth in 1Q13.

Here's more:

VIP growth remained steady as evident in the segment’s 10% y-y/5% q-q growth (versus 4Q12: +5% y-y/+7% q-q). Mass revenue growth also remained robust, recording a 30% y-y increase (but only +6% q-q due to seasonality).

While the VIP segment drives sentiment, the mass segment continues to drive the bottom line. As the mass market continues to outperform the VIP segment, we expect all operators to deliver q-q growth in EBITDA in 1Q13.

We think the strong mass growth will continue as visitation growth persistently plays out alongside the infrastructure upgrade theme as well as further table limit uplift, as we observed during 1Q13. This should bode well for overall earnings growth.

Catalysts – Wynn and Galaxy to top the chart
Wynn and Galaxy recorded among the highest q-q revenue growth in 1Q13. On the mass front, Galaxy Macau benefited alongside other Cotai properties during the Chinese New Year period.

As for Wynn, the q-q improvement in mass and slot segments could be attributed to higher table limits and stronger traffic, in our view. We think Wynn’s low base in 4Q12 may have contributed to the q-q jump, too.

On the VIP side, the favourable win rate was the key reason behind the strong q-q increase, as volume was relatively flat for both players.

Sands China also enjoyed strong mass growth in the past quarter but lower non-gaming earnings due to seasonality dwarfed the q-q EBITDA improvement for the operator.

Takeaway – Top-line growth could pick up due to base effect into May April revenue is tracking MOP28-29bn (+12-16% y-y) based on data for the first 14 days.

We think the y-y growth rate could continue to pick up given the base for May was meaningfully lower due to VIP slowdown last year; in our view, this should be positive for the sector despite YTD outperformance.