Sentiment for Macau has been pretty lousy over the past two months or so. While people abandoned Vegas as a gaming destination long ago (don’t even think about Atlantic City at this point), Macau has for the most part weathered the storm amid the global macroeconomic environment. But in May and June of this year, numbers were down across the board from VIP numbers to slot revenue.
Things just weren’t looking good and it makes sense considering the state of the global economy at the moment. But the latest numbers show there is hope out there. Hedgeye Gaming, Leisure and Lodging (GLL) Sector Head Todd Jordan wrote a note this morning showing that trends are improving in the Far East:
“Following a bottoming of revenue growth in July and investor sentiment, we expect improving Macau trends. August is off to a great start and September should be even better. Melco Crown Entertainment (MPEL) has the most leverage to a Macau rebound while Las Vegas Sands (LVS) should benefit from the opening of 2,500 additional rooms in mid-september. Both stocks remain attractively valued.”
If you’re looking for a Macau trade, going long Jordan’s two favorites (LVS and MPEL) works while conversely going short MGM Resorts (MGM). MGM is highly levered to Las Vegas and no one is excited about the Strip these days – especially in the summer when it’s busy hitting 120 degrees during the day.