A MACAU TRADE

Slowing growth is real but other factors may be exaggerating the issue.

We’ve seen this Macau movie before.  The sentiment pendulum swings too far, this time to the negative.  However, there are some additional, more transitory factors to explain May’s disappointing revenues thus far.  Don’t get me wrong:  we’ve been on the growth slowing theme for a while and have been mostly negative on LVS, WYNN, and MGM over the past few months.  So it’s not like we’re trying to justify Buy ratings.

Here are some thoughts on May:

  • Low hold:  We think low hold may have impacted YoY growth by around 5%.  Our unadjusted growth projection was 8-12%.
  • Shorter Golden Week:  Not only was Golden Week only 7 days (last year it was 10) but it started in April.  So May 2012 didn’t get as big a pop from the GW celebration.
  • Calendar:  May 2012 was down 1 Sunday from May 2011.

Our conclusion is that May was actually not that bad.  In fact, we think June could rebound to growth of 17-22%.  Given how low sentiment and the stocks have gone in the past month, a rebound like this would be a big catalyst.

We like LVS and WYNN here for a trade.  LVS’s market share will grow off the current 17.5%, evidence of which could come as soon as Monday when we get the weekly numbers.  Wynn Macau may have been hurt the most by low hold in May and we believe their market share was probably in the 12-13% range assuming normalized hold versus the 11.1% generated MTD.