Macau's glory days still far behind - WSJ

Gross gambling revenue in the first 10 days this month is 18% higher than last year, says Bernstein. Partly, the strong growth was due to the low base last year affected by a typhoon. For the whole of October, analysts expect a 5% to 8% year-over-year increase, the third straight month of growth.

This is a relief after a long stretch of shrinking revenues. But the glory days are far behind as the type of bettors visiting Macau has changed.

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China’s antigraft effort since Xi Jinping became president in 2013 has driven away high rollers, and there are no signs that they will come back. In fact, many of those high-stakes gamblers have turned up in other countries

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Morgan Stanley expects VIP revenue in the Philippines to grow nearly 20% this year, for example. Easier visa policies are encouraging Chinese to gamble abroad, where they enjoy a higher level of anonymity. The lower tax rates outside Macau also enable casinos to offer higher rebates to gamblers.

Wynn Macau, which had 60% of its casino revenues before commissions coming from VIPs in the first half of this year, could be a key victim of this shifting landscape. Wynn’s share price has surged 68% from January lows as investors hoped its new 1,700-room casino-resort, opened in August would help the company to sweep up more lower-spending but higher-volume mass-market gamblers.

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The $4 billion Wynn Palace, however, looks more like a bigger version of its existing hotel in Macau, raising fears that it will lead to cannibalization

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Wynn’s share price has fallen nearly 20% the past two weeks. The company is also the most indebted among the six operators, with its net debt equal to eight times its earnings before interest, taxes, depreciation and amortization.

Another new hotel, the Parisian Macao from Sands China, is a better bet for attracting casual gamblers and family vacationers. The 3,000-room resort, with an Eiffel Tower replica, has more affordable rooms, more shops and more restaurants. The company also has a lower debt load, making it more likely to keep its 5.7% dividend yield, critical for supporting the shares of its U.S. parent, Las Vegas Sands.

With Macau getting more visitors, albeit with shallower pockets, the casino that spreads its bets does best.