Stocks of Struggling Macau Casinos Crumble

By Mia Lamar 

The struggles of Macau's casinos have hit their Hong Kong-traded stocks, wiping out a quarter of their combined market value this year.

Investors have fled these once-hot stocks as revenue has fallen for three-straight months. More losses could be in store as September shapes up to see Macau's worst-ever revenue decline. Deutsche Bank analysts say they expect Macau gaming revenue to fall 18% in September, worse than the decline they suffered in the aftermath of the global financial crisis.

The Hong Kong-listed shares of the major Macau casino operators have long been investor favorites. But that has changed. Hong Kong-listed shares of Sands China Ltd., the Macau unit of Las Vegas Sands Corp., are down 30% in 2014, the biggest loser on the Hang Seng Index. The stock leapt 87% in 2013 following a 55% surge in 2012. Fellow casino operator Galaxy Entertainment Group Ltd. is down 28% year-to-date, the second-worst performer on the Hang Seng. Wynn Macau Ltd., a unit of Wynn Resorts Ltd., is down 26% this year.

Together, the six major Macau casino operators have lost a quarter of their combined market value since the beginning of the year, according to brokerage Kim Eng.

China's anticorruption drive has sent an important gambler system known as junkets into disarray, draining the city of high-rolling gamblers that accounted for nearly two-thirds of casino revenue last year. Revenue from gamblers at Macau's VIP tables was down an average of 16% in June, July and August.

As revenue has declined, investment banks have been cutting their outlooks for the casinos. J.P. Morgan last week predicted overall gaming revenue in September would fall up to 21% from the previous year.

"We believe this would be below even the lowest expectations on the Street," J.P. Morgan said.

The September figures will be released the first week of October.

Write to Mia Lamar at [e-mail]

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