Macau Casino Equities Slide to Five-Year Lows as August Visitation Tumbles

Posted on: August 19, 2021, 08:02h. 

Last updated on: August 19, 2021, 01:32h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

A basket of Macau casino stocks slumped to the lowest levels in five years today. That’s after a research firm said August gross gaming revenue (GGR) and visitation are trending well below July levels amid coronavirus-related travel controls.

Macau stocks
Macau casino stocks, including Wynn seen here, are having a rough go. Analysts say that could last into September. (Image: NPR)

In a note to clients, Bernstein analysts say GGR in the special administrative region (SAR) for the seven days ending Aug. 15 plunged 37 percent week-over-week, marking the lowest weekly tally in nearly a year. The average daily GGR for that period was $10 million, down from $16 million in the first week of the month.

The past week’s GGR bottomed as the travel impediments caused by Macau’s recent local COVID cases remain largely in place and [mainland] China travel restrictions due to its outbreak had intensified,” according to the Bernstein note. “This is the lowest daily GGR since late September (2020).”

Earlier this month, Macau officials employed “immediate pandemic prevention” protocols after a local family of four tested positive for COVID-19. Those were the autonomous region’s first documented cases in more than 500 days.

Ongoing Issues for Macau

The slack arrives at a time of prolonged weakness for Macau gaming equities. It’s a scenario that’s vexing analysts and executives alike, who expected the SAR would rebound faster from the coronavirus pandemic than other major gaming markets.

That hasn’t been the case, as Macau’s recovery efforts are stymied by pandemic-related travel restrictions. The SAR hasn’t been able to establish a travel bubble with Hong Kong, and quarantine policies with an increasing number of cities in mainland China are further hindering rebound efforts. In a normal year, Mainland China and Hong Kong combine to deliver 85 percent or more of visitors to the world’s largest casino center.

“Macau now has 14-day mandatory quarantine or ‘health management’ on travelers from districts in more than 30 cities of 11 provinces in China (but seven cities of four provinces were removed from the list over the past week),” said the Bernstein analysts. “The current COVID situation in China will last at least a month with disrupted travel to Macau.”

The research firm estimates the SAR’s August GGR will come in 80 percent below the August 2019 mark, while declining 50 percent on a month-over-month basis.

Prolonged Slump for Macau Casino Stocks

The aforementioned weakness in Macau gaming equities pertains to Hong Kong-listed shares of the SAR’s concessionaires. But that slump is on display with some of the US-listed names.

For example, Wynn Resorts (NASDAQ:WYNN), which, in a normal operating environment, derives two-thirds or more of its revenue and earnings before interest, taxes, depreciation and amortization (EBITDA) from its two Macau avenues, is off 18.15 percent year-to-date. The stock resides at its lowest levels since last December and trades 38.33 percent below its 52-week high.

Down almost 20 percent over the past month and nearly 36 percent year-to-date, Las Vegas Sands (NYSE:LVS) – the largest Macau operator — trades at its lowest levels since the start of the pandemic. The LVS slump is now so lengthy it’s one of just a handful of S&P 500 members that haven’t posted gains since the March 23, 2020 market bottom.