Macau's gross gaming revenue jumped 20% to $3.69b in July

Unfazed by China's mild economic slowdown.

According to Moody's, last Thursday, the Gaming Inspection and Coordination Bureau of Macau SAR announced that gross gaming revenue grew 20% year over year in July to MOP29.49 billion ($3.69 billion), the third highest monthly revenue since Macau liberalized its gaming sector in early 2000. 

The gaming revenue growth is credit positive for Macau’s (Aa3 stable) gaming operators.

The operators include MCE Finance Limited (Ba3 stable), a 100% owned subsidiary of Melco Crown Entertainment Limited (unrated), Sands China Ltd. (unrated), a 70.2% owned subsidiary of Las Vegas Sands Corp’s. (Ba2 stable) and Wynn Macau Limited (unrated), a 72.29% owned subsidiary of Wynn Resorts, Limited’s (Ba1 stable).

The increased revenue will strengthen the companies’ financial profiles and cash flow to support their planned expansions, mainly in the Cotai area of Macau.

For the first seven months of the year, gross gaming revenue grew 15.9% year on year to MOP200.93 billion ($25.12 billion), up from the full-year growth rate of 13.5% for 2012.

In late July, Las Vegas Sands Corp. and Wynn Resorts, Limited, respectively, reported 45.4% year on year growth and 4.9% year on year growth in EBITDA for their operations in Macau in the first six months of the year.

The strong performance reflects the resilience of Macau’s gaming sector despite a mild slowdown in China’s economy (China’s GDP growth slowed to +7.5% year on year in the second quarter from +7.8% for the full year of 2012) and the Chinese government’s attempts to combat corruption and money laundering (tighter scrutiny deterred government officials from frequently visiting Macau or making big bets in casinos).

The growth in 2013 has been driven by a strong 26.7% year-on-year growth in mass-market gaming revenue the first half of the year, according to the Gaming Inspection and Coordination Bureau of Macao.

For the same period, VIP gaming revenue grew 10.5%. The share of mass-market gaming revenues thus increased to 32.4% during the first half of 2013 from 26.8% for the full year of 2011.

The increased proportion of mass-market gaming, which is less sensitive to economic cycles and the credit availability of junkets, provides more solid support to Macau’s gaming revenues.

We expect Macau’s gaming revenues will maintain stable growth of around 15% in the next six to 12 months. Mass-market gaming will remain the growth engine, supported by the increasing numbers and affluence of visitors from mainland China, the major customers for casinos in Macau.

The number of mainland visitors, 63% of all visitors to Macau, grew 9.8% year on year during the first half of 2013, according to Macao’s Statistics and Census Service.

Gaming operators’ debt leverage has been improving over the past few years on strong gaming revenue growth.