Macau Casino Stocks Surge as Operators Adapt

Macau’s casino sector remains on the road to recovery, with a steady rise in visitor numbers, improved infrastructure, and an evolving entertainment landscape sparking a surge in investor sentiment. Casino stocks have steadily increased in the past three months, driven by encouraging gaming revenue reports and a wave of special events drawing large crowds to the region.

Casino Floors Remain Packed

According to a recent Bloomberg report, Macau gaming shares have risen 53% since April. Melco stocks have nearly doubled over the spring, with MGM China and Wynn Macau recording similar upticks. Notably, these results outperform broader benchmarks such as the Hang Seng Composite. Analysts attribute this comeback to a mix of relaxed travel restrictions, new high-speed rail connections, and blockbuster performances by regional music stars.

Gaming performance was boosted by Cantopop icon Jacky Cheung, whose series of concerts in the city spans mid-June to early July.

Bloomberg report

Despite this industry rally, lingering concerns remain over China’s economy and ongoing regulatory shifts. However, Macau’s casino floors are buzzing with activity as many industry experts believe this rally has not yet reached its climax. Current valuations remain below historical averages, giving bullish investors another reason to bet on Macau.

MGM China, in particular, has gained momentum over the past few months, taking more market share through savvy reinvestment and strategic upgrades. The company expects a projected 3% growth in revenue and a 2% increase in EBITDA within the next four years. MGM China stands out as a beacon in Macau’s post-pandemic recovery despite overall gross gaming revenue remaining below pre-pandemic levels.

Recent Policy Shifts Should Net Positive Results

Several policy changes around satellite casinos are likely also responsible for the recent stock rally. New rules aimed at streamlining the gaming sector and fostering greater economic diversification will lead to the shutdown of eleven such locations. While the closures will affect some employees, leading concessionaries should absorb the workforce and gaming equipment within their primary venues with minimal disruption.

July is expected to be another above-trend month. The update from our sources and checks appears to substantiate the strong momentum in the stocks, which could continue.

Anne Ling, Jefferies Financial Group Inc. analyst 

Despite the tailwinds, economic risks remain as tense US-China relations could impact American concessionaries like Las Vegas Sands and Wynn Resorts. While industry insiders expect no short-term policy changes, some fear that rising tensions could usher in more stringent regulation. In a worst-case scenario, foreign companies could be phased out entirely.

While gambling remains a core pillar of Macau’s economy, the region is no longer content to bet it all on the tables. Authorities are actively encouraging casino operators to diversify, investing in cultural attractions, tourism initiatives, and technology development. It’s part of a long-term effort to reshape Macau’s economic model and reduce its vulnerabilities to sudden economic shocks.