Happy New Year in Macau: December revs set new record

BAC:

Macau revenues grew +66% in December to ~MOP18.9B According to DICJ, Macau gaming revenues grew +66% to MOP18.88B, a new monthly record vs. the prior record of MOP18.87B set in October ’10. December’s strong results were above mid-month expectations (revenues were tracking +50% through the first three weeks of December). This indicates a big acceleration in the last two weeks of the year and was overall better than the three-year historical trend of coming in at least 10% lower than October. On a 2-year basis, Dec’s +113% was ahead of Nov’s +102% and 3Q’s +71%. FY2010 revenues of ~MOP188B set a new record, growing +58%.

WYNN and LVS pick up market share in December

According to Macau Business, there were some market share shifts in December, with WYNN and LVS the main beneficiaries. LVS gained ~170bps of market share to 16.7% (19% share in 2010) and WYNN picked up ~60bps of share to 17% (15% in 2010). Notably, WYNN rose to capture the 2nd greatest market share in Dec. There should be upside to 4Q Street estimates for WYNN; we are reviewing our model. SJM was the greatest share donor in Dec, dropping ~200bps to 30% (32% share in 2010) and Galaxy’s share dropped ~50bps to 10% (11% share in 2010). MGM’s share was 11.7% (9% in 2010) and MPEL’s share was 14.5% (~14% share in 2010).

Expect stocks to be strong on Dec revs, China PMI offset

December’s revenue outperformance relative to market expectations is clearly impressive and we expect strong stock performance as a result. That said, the Macau gaming names are highly levered to any macro headwinds in China and the slowdown in China’s PMI could be a bit of an offset to strong revenue performance in Macau. We remain bullish on the Macau market with continued signs of strong demand from junkets and the Chinese high-end consumer, favorable liquidity conditions in China and a strong base of underlying gaming volume the market is carrying into 2011. LVS ($45.95, Buy) and WYNN ($103.84, Buy) remain our top picks given their Asia exposures.

 

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