A Surge in Macau Casino Stocks Shows Industry on Path to Recovery

South China Morning Post reported that this is evident in the recent stock market performance of casino operators such as Galaxy Entertainment, Sands China, and MGM China, which have seen significant growth in the past few weeks. In fact, a Bloomberg index that tracks the performance of six of the largest casino operators in Macau has seen an increase of 4%, the highest gain in five weeks.

Analysts Optimistic About Macau Casino Industry

The surge in casino stocks can be attributed to the 82.5% rise in Macau casinos’ Gross Gaming Revenue (GGR) last month, which amounted to MOP 11.6 billion ($1.4 billion), according to government data. This marks the first time GGR has surpassed the MOP 10 billion ($1.2 billion) threshold since May 2021. 

Although the current GGR is only 46% of the pre-pandemic volume recorded in January 2019, analysts remain optimistic about the future of the industry, particularly with the positive signs of tourist arrivals during the recent Lunar New Year holiday.

Investors are closely monitoring whether the January recovery, fueled by the holiday season, will continue into the months of February and March.

In fact, Jefferies, a brokerage firm, predicts that the casino industry could reach 49% of pre-pandemic levels this year, with a potential daily GGR of MOP 390 million ($48.2 million). This figure is expected to rise to 64% or MOP 508 million ($62.7 million) next year. 

Despite the losses incurred by operators during the final quarter of 2022, JPMorgan Chase believes that investors should look past these figures, as they were well expected. MGM reported a $55 million loss, while Wynn Macau suffered a $59 million setback.

The Macau Government Made Efforts to Support and Diversify the Casino Industry

The Macau government has also taken steps to support the casino industry, by renewing contracts with six companies for a period of 10 years. In exchange, the operators have pledged to spend $13.5 billion outside their core business, as part of an effort to diversify the local economy. This has led analysts like DS Kim of JPMorgan to remain bullish on the sector, as current valuations are considered compelling.

However, a key factor in determining the future success of the industry will be the removal of border restrictions and the restoration of international flights. This will allow for wider travel options, which will in turn increase visitor numbers to Macau. 

In late November, the restrictions in China aimed at controlling the spread of Covid-19 were relaxed. By early January, these measures were entirely lifted, allowing for a swift revival of the country’s economy. This sudden shift took the market by surprise and led to a surge in Hong Kong’s stock market, resulting in a gain of approximately $1.5 billion.