When you think of Las Vegas, you don’t just think of gambling – you think of shows, concerts, debauchery, nightclubs and a slew of other entertainment options. When you think of Macau, you strictly think in terms of gambling and numbers. Despite Macau’s meteoric rise over the last decade, it appears that the amount of VIP high rollers is tapering off and has been since last September. Growth slowing is not something new and abrupt – we have been banging our fist against the table, noting how slowing growth is a global phenomenon not limited to the US and Europe.
Based on the prior two months of data, we’ve estimated projected Junket VIP volume growth for the rest of FY2012. Decellerating macro factors combined with an sluggish global economy has led slower growth and declining volumes in Macau’s VIP market. When the VIPs begin to drop out, both the hitters and regulars will also begin to take flight. This leads to another factor that keeps investors worried: gross gaming revenue growth (GGR). If GGR goes negative, returning to growth will be a long, dragged out journey.
For active traders, names like LVS and MPEL may be attractive at lower levels, but we caution about hopping into them over a short-term TRADE duration. It will take some time for these names to appreciate and build their growth and revenue back up, so we favor the longer-term TREND and TAIL durations.