Macau's New ATM Withdrawal Limit No Threat to Long Term

We do not plan to adjust our fair value estimates for our Macau-exposed casino operators, as we don’t expect a meaningful impact from the Monetary Authority of Macau’s announcement that the daily ATM withdrawal limit will be reduced to MOP 5,000 ($626) from MOP 10,000. We reiterate our view that Macau gaming revenue will only gradually improve until 2018, when key infrastructure projects come on line that alleviate the region's capacity constraint issues. Further, we remain constructive on the gaming enclave's long-term growth potential, as the government continues to invest in the region to position it as a world resort destination. Investors seeking gaming exposure should keep narrow-moat Wynn Resorts (60% of total EBITDA comes from Macau) on their radar, as the shares are once again trading in 4-star territory.

While it is unknown what percentage of gamblers use ATM withdrawals, we find evidence that controls like the one just announced probably have minimal impact on industry financials. For instance, Beijing and Macau have announced restrictions on Union Pay debit cards multiple times over the past few years, with the last such announcement in September 2015 when an annual ATM withdrawal limit of CNY 100,000 ($15,000) was introduced starting in 2016. Despite that control, Macau gross gaming revenue has gradually improved on both a one- and two-year stacked growth basis throughout 2016, implying that its impact to the region’s sales growth may have been minimal. Additionally, mainland visitors have other methods of extracting cash for gambling, such as pawnshops or bringing money directly over the border (Macau government recently proposed declaring cash amounts over MOP 120,000, or $15,000), or in the case of high-end players, junkets. Alternatively, individuals often have multiple Union Pay cards from various accounts that they can use to withdraw higher cash amounts.

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