Casinos and Gaming

Wynn soars 3 percent as report shows it's gaining Macau market share

Key Points
  • Bernstein says Wynn Resorts is gaining share in Macau against Las Vegas Sands and others.
  • Macau's May gaming revenue is expected to mark the fourth consecutive month of double-digit growth.
The Wynn Palace casino in Macau.
Isaac Lawrence | AFP | Getty Images

Wynn Resorts stock jumped 3 percent on Monday as a report showed it is gaining market share against rivals in Macau as gaming revenue trends improve in the gambling mecca.

Brokerage Sanford C. Bernstein said its channel checks show Macau's casino gross gaming revenue (GGR) last week was ahead of its estimates and also that Wynn and MGM Resorts have gained share on a month-over-month basis from other big casino operators, including Las Vegas Sands.

Earlier this month, China's powerful chairman of the National People's Congress, Zhang Dejiang, visited Macau, and his visit was seen as more supportive of the region's economy. He also urged local leaders to diversify the economy behind gambling.

"Revenue has increased post Zhang's visit," Bernstein said. "With dragon boat festival holidays coming, GGR may continue to show strength into the month end."

In trading, Wynn shares are up just over 3 percent and MGM is up more than 1.6 percent. Also, Las Vegas Sands is up nearly 2 percent.

Previously, the central government in Beijing caused headaches for Macau's casino operators by launching a crackdown on the so-called junket business. The junkets or specialists bring in the high-value Chinese rollers to the Macau casinos.

Despite the crackdown, organized crime remains a problem. Earlier this month, it was reported by the local Macau paper that police arrested 11 people from the mainland for ties to a loan-sharking gang, which had offered casino customers loans.

Morgan Stanley said in a note Monday that large institutional investors have increased their allocation of U.S. gaming stocks in the first quarter compared with the final quarter of 2016, pointing out that Wynn and Las Vegas Sands were favorites due in part to "greater optimism on Macau."

Even so, Morgan Stanley said, "Wynn's institutional ownership remains relatively low vs. historical levels."

Wynn's stock is already up more than 44 percent this year, making it the top performer among the U.S.-based casino giants.

May is expected to mark the fourth month in a row of double-digit percentage growth in Macau's gaming revenue. According to Consensus Metrix, analysts' estimates for Macau GGR growth in May are trending around 15 percent.

Bernstein now forecasts Macau's May monthly GGR will increase between 14 and 16 percent compared with a year ago, or "slightly higher than our expectation of 12-14 percent."

Wells Fargo is even more bullish on the Macau GGR growth for May, predicting around 14 to 18 percent growth, according to a note published Friday.

In April, Macau's gaming revenue rose 16.3 percent, ahead of analysts' consensus for 15 percent growth.

The big U.S. casino companies have been spending billions of dollars in the past year expanding operations in Macau, a former Portuguese enclave and the only area in China where casinos are legal.

In August, Wynn opened its $4.1 billion Wynn Palace casino resort on the Cotai Strip of Macau. Las Vegas Sands opened its $3 billion Parisian Macau resort in September, and MGM plans to open its $3.3 billion MGM Cotai complex in the fourth quarter of 2017.