Analysts bet on Macau’s fast recovery

Analysts believe gross gaming revenue could recover to 25 per cent of pre-pandemic levels in the short term.

Macau.- Several analysts have said they expect Macau gaming revenue to recover in the next few months.

Chelsey Tam, Morningstar’s senior equity analyst, has said investors would be wise to invest in Macau gaming companies right now, when the sector is undervalued.

She said “After Covid-19 is under control, we are very confident that the sector will have room to catch up to our fair value estimates.”

She warned, however that the recovery could be delayed or halted by any new spike in Covid-19 cases in the region causing travel restrictions to be enforced again.

Union Gaming analyst John DeCree, meanwhile, said Wynn Resorts would be the operator to lead the recovery in the region, raising its rating from “hold” to “buy”.

According to Casino.org, he said: “We expect the initial recovery will be in the premium mass and VIP segments and anticipate a flight to asset quality for both investors and consumers.”

DeCree also said Hong Kong was expected to eventually lift travel restrictions, boosting Macau’s tourism income. After mainland China, Hong Kong accounts for the largest amounts of visitors in the city, but the health code system to allow quarantine-free travel has been delayed over a recent spike in positive Covid-19 cases.

This week, casino stocks jumped after Guangdong authorities cleared Macau residents with recent negative Covid-19 test results to enter nine cities without having to go through a 14-day quarantine.

IAG reported that Guangdong accounted for 46 per cent of mainland China’s visitors and up to 35 per cent of gross gaming revenues (GGR) last year. As a result Credit Suisse analysts Kenneth Fong, Lok Kan Chan and Rebecca Law believe Macau’s GGR could recover to 15 – 25 per cent of pre-pandemic levels in the short term.

JP Morgan’s DS Kim, Derek Choi and Jeremy An have said GGR could grow to between 20 and 25 per cent of 2019 levels, to between MOP$150 million and MOP$200 million (US$18.7 million to US$25 million) per day in the coming month. They also believe China could grant visas for travellers from outside Guangdong to go to Macau in the near future.