Macau is the absolute leader in the gambling market at the moment and it has no intentions to give up its position.
It is currently the world’s number one gambling resort, which is not surprising as betting was legal there from mid-19th century, and the gaming culture is establishing ever since then. Nowadays around 30 million visitors come to Macau every year and one of the primary reasons in addition to tourism is of course gambling.
Another reason for Macau’s popularity among gamblers is the fact that is one of the Special Administrative Regions in China with unique status and it is the only jurisdiction where gambling is completely legal.
Macau hit Las Vegas
11 years ago Macau opened up the casino market, according to Chinese gambling laws and became the favorite place for gamblers in Asia, which also has the nickname “Monte Carlo of the Orient”. Later on, the gaming revenues skyrocketed and in 2007 Macau became the most profitable player in the gambling sector leaving the grand Las Vegas far behind.
Macau is flourishing and it reported a 13% increase in gambling revenues this March in comparison to the same time last year.
Just to make the situation more clear a plain comparison between Macau and Las Vegas shows that the difference between the two is simply incredible – Macau earned $4.4 billion just in March, whereas Las Vegas got $6.5 billion for the whole 2013. When figures speak, it is really hard to pull out stronger arguments.
One of the major differences between Macau and the US gambling Mecca is the fact that 70% and 80% of Macau’s gaming revenues come from VIP players, in contrast to players who just take day trips to the US casinos in Las Vegas and Atlantic City.
Wynn’s smart move to Macau
Wynn Resorts is one of the most central players in Macau and the Chinese region has treated it very well.
Back in 2006, Wynn’s total revenues were $1.43 billion, and around 80% of them were coming from the US. When the financial crisis hit the market, Wynn was having extremely hard time, but its arrival in Macau turned out to be the best possible move.
The results came short after and in 2013, the revenues from the US market were $1.58 billion, but Macau’s revenues were the amazing $4 billion, which represented nearly 72% of the company’s total sales. In addition, its stock rose with 952.5% in the last five years after entering the Macau market, which made it a hit in the gambling news.
Wynn’s stock levels
Despite Wynn’s obvious success in Macau, financial gurus’ seem to be not that positive about the future of the stock. One specialist who shares this opinion is Richard Ross, who is a global technical strategist at Auerbach Grayson, and he suggested that investors should cash their stocks.
Macau is the sole leader in the gambling market, in the last years
• Around 30 million visitors come to Macau every year
• Macau earned $4.4 billion just in March 2014
• 70-80% of Macau’s gaming revenues come from VIP players
He said: “It’s not good if you own Wynn here. This stock has been on quite a ride here. It’s almost ironic as the Chinese stock market is moving in exactly the opposite direction over the last five years. These gambling stocks are feasting on the Chinese consumer.”
Ross suggested that Wynn’s stock will be making a parabolic reverse from its all-time high of $249.31 in March 2014.
He added: “It’s a rapid reversal in risk appetite. It tells us investors have gone from wildly bullish to now somewhat cautious. That’s not good for a high beta, highflying momentum stock like Wynn.”
Ross explained that the stock is going towards its 100-day moving average, as it is now at $202/share and things may get worse: “A break below those levels would really set the stage for an even more sinister decline. I would avoid it at these levels. I think its salad days are behind it.”
Different point of view
On the other hand, Andrew Busch, editor and publisher of The Busch Update, expressed his opinion that Ross is probably right, when it comes to the short term, but in the long term Wynn has a special bond in Asia, which goes beyond Macau.
He commented: “The game that really matters is what’s going on in Japan. Japan is talking about legalizing gambling, especially in Tokyo.”
The idea about legalizing gambling in Japan was on the table for numerous years, and the submitted bill for this is expected to pass: “If that happens, all of these stocks will massively benefit. If it’s legalized, their earnings are going to see a significant positive pop to it.”