Macau June GGR Could Surprise to Upside, Says Analyst

Posted on: June 22, 2023, 02:14h. 

Last updated on: June 22, 2023, 02:28h.

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

Macau’s June gross gaming revenue (GGR) could potentially surprise to the upside after the May figure reached the highest level since January 2020.

Las Vegas Sands
The Venetian Macau. Analysts see strength in Macau stocks and GGR reports. (Image: Bobby Yip/Reuters)

In a new report to clients, Roth MKM analyst Edward Engel said Macau’s GGR report for the sixth month of the year could potentially be a bullish surprise as a recent uptick in coronavirus cases in China wanes. That’s not a stretch when considering concessionaires generated $1.93 billion in May GGR despite some COVID-19 headwinds.

As China’s latest COVID wave continues to fade, we believe June GGR can surprise to the upside as Macau’s rebound continues through June and into July/August’s peak summer travel season,” wrote Engel.

The official June GGR report will be delivered on July 1. Engel believes it will show a 5% month-over-month increase thanks to recent liberalization of visa issuance. Residents of mainland China must obtain a government-issued visa to enter Macau.

Why Macau June GGR is Important

Macau’s monthly GGR reports are among the most widely watched data points in the global gaming industry, but the June update could be particularly noteworthy because it could provide analysts with a sense of how things are shaping for July and August, which are typically two of the busiest months of the year for Macau travel.

On that note, Roth MKM’s Engel is constructive on the outlook for Macau’s gaming revenue in the seventh and eighth months of the year. He’s bullish on Macau stocks at large, including Las Vegas Sands (NYSE: LVS). The parent of Sands China operates five integrated resorts in the special administrative region (SAR).

Sands is already one of the leading performers among casino operator equities this year, and Engel isn’t alone in the belief that stock could notch more upside in the second half of 2023. Nearly 74% of the analysts that cover the stock have the equivalent of a “buy” rating on it, believing it offers potential upside of 22% relative to the consensus price target.

City of Dreams operator Melco Resorts & Entertainment (NASDAQ: MLCO) is another Macau name gaining favor among analysts.

We like MLCO’s quality non-gaming assets, proven by its recent successful launch of non-gaming events, which should offer the most positive earnings surprise in 2Q23,” wrote Credit Suisse analyst Kenneth Fong in a note earlier this week. “This should also benefit the company from a mass-driven recovery ahead, while the sustainability of the ability in attracting new players remains to be seen.”

Fong highlighted Macau’s summer travel season, second-quarter earnings, and the possibility of China deploying monetary stimulus as potential catalysts for shares of Melco.

Another Macau Name to Monitor

MGM Resorts International (NYSE: MGM) is another Macau operator Wall Street is constructive on. The company owns 56% of MGM China, which controls two integrated resorts in Macau.

Since the start of the year, the MGM Cotai operator has been one of the best-performing large-cap travel and leisure equities, but there could be more upside in store. Sixty-one percent of the analysts covering the name rate it “buy” or better, and the stock resides at about 33% below the consensus price target.