Gamblers have no way of telling the end of a winning streak from a random loss. Investors in casino stocks face the same problem. Gaming revenues in Macau grew during December, but not as much as expected. Sharp-eyed shareholders in these casinos should focus on liquidity conditions in China rather than revenues in the former Portuguese colony.
Shares prices of Wynn Macau and Galaxy Entertainment roughly doubled last year and near their 2013 peaks. Competitor Sands China, which attracts fewer high-rollers, gained a mere quarter. Investors expect more of the same in 2018. New infrastructure in Macau, such as the Zhuhai bridge, should deliver more mainlanders to the tables more quickly. Casinos have already added rooms to accommodate them, so capital spending should slow down in coming years.
Revenues have grown because the middle classes as well as the super-rich are flocking to gambling tables. Morgan Stanley analysts expect this trend to continue as consumers become wealthier. Diversifying the customer base should support earnings growth. Wynn Macau looks particularly well placed, given that competitor facilities remain under construction while its own are complete. That should help it take market share.